Modern Macroeconomics and Monetary Policy：现代宏观经济学与货币政策.ppt

Modern Macroeconomics and Monetary Policy Chapter 14 Three Tools of Monetary Policy Open Market Operations Discount rate Reserve requirements What’s a “rate cut”? Feds HintsOf a Rate Cut Cheer Markets By SUDEEP REDDYNovember 29, 2007;?Page?A1 The Federal Reserve, faced with mounting signs of a slowing economy, opened the door to an interest-rate cut next month, cheering the nations stock market, which staged its biggest two-day rally in five years. The latest signal from the central bank came in remarks by Donald Kohn, its vice chairman, which represented a Fed acknowledgment that the financial-market turmoil that started this summer remains a threat to the economy. * Money interestrate The quantity of money people want to hold (the demand for money) is inversely related to the money rate of interest, because higher interest rates make it more costly (recall OPPORTUNITY COST) to hold money. The Demand for Money Money Demand Quantity of money Quantity of money Money interestrate The supply of money is vertical because it is established by the Fed. It’s EXOGENOUS in the model. Money Supply The Supply of Money D1 Moneyinterestrate S1 D S1 i1 Qs r1 Q1 i2 Qb r2 Q2 S2 S2 Realinterestrate Quantityof money Qty of loanable funds When the Fed shifts to a more expansionary monetary policy, it usually buys additional bonds, expanding the money supply. Transmission of Monetary Policy This increase in the money supply (shift from S1 to S2 in the market for money) provides banks with additional reserves. PriceLevel Goods Services (real GDP) D S1 r1 Q1 r2 Q2 S2 Realinterestrate P1 Y1 Y2 AS1 AD1 P2 AD2 Transmission of Monetary Policy Qty of loanable funds Unanticipated Expansionary Monetary Policy Fed buys bonds Transmission of Monetary Policy Real interest rates fall Increases in investment consumption Depreciation of the dollar Increase in asset prices Increases in investment consumption Net exports rise Increase in aggregate demand This incre