PPT-Lesson 7 Fiscal and monetary policy under alternative exchange rate regimes and perfect

the MundellFleming model Case 1 Flexible exchange rate regime Monetary policy effectiveness Changes in money supply An increase in money supply MPl 1 Yl 2 i eq16 reduces the local interest rate and increases investments and output eq 11 and 13 Since the model represents an open economy the local interest rate is now lower than the global interest rate The UIP is no longer verified . Two polar cases. Fixed (pegged) exchange rates. CB buys or sells reserves to maintain a set price of foreign exchange. Flexible exchange rates. CB does not intervene in market for foreign exchange. and . Can Foreign Exchange Intervention Stem Exchange Rate Pressures from Global Capital Flow Shocks?” . by Olivier Blanchard, Gustavo Adler. & . Irineu. de . Carvalho. . Filho. Jeff Frankel. Harvard Kennedy School. States of the Gulf. R. Espinoza*, G. Fayad. §. and A. Prasad. #. *Research Department, IMF. § . Strategy, Policy and Review Department, IMF. # . Middle East and Central Asia Department, IMF. . 4/2/2012. Unit 3: Exchange Rates. Exchange Rate Regimes. fixed exchange rate . –. a currency's value is matched to the value of another single currency or to a commodity (e.g., gold). floating exchange rate . Monetary Policy. Fiscal and Monetary Policy. The Nature of Fiscal Policy. THE NATURE OF FISCAL POLICY. The purpose of fiscal policy. correcting a fundamental disequilibrium. fine tuning. Government finances. EMU involves …. Policy harmonisation . to remove obstacles to factor . mobility . A more . marked and wider range of common policies, especially in relation to macroeconomic . policy. Irrevocably fixed . UNCTAD, World Bank and IMF Workshop. Geneva, February 06-10 2017. Outline. What are the links between macroeconomic policy and the formulation of debt management strategy?. How do these links operate in practice?. International . Political Economy. Prof. Tyson Roberts. Balance of Payments (. BoP. ). Current account. Current account balance =. Current receipts – Current Expenditures. Current includes . Goods & services. . Some Unanswered Questions. Rashad . Cassim. Economic Research and Statistics . Stellenbosch University. 27/02/2017. Objectives of Presentation. T. o share with you some of the analytical and empirical difficulties we experience in making sense of the current . International Political Economy. Prof. Tyson Roberts. 1. Goals. Macroeconomic . Trilemma. Review. State-centered approach to macroeconomic policy. Central Bank Independence. Argentina case – the beginning…. Fixed vs. Floating. The exchange rate fluctuates in a narrow range (or not at all) against a base currency over a sustained period of time. . Government action is needed to maintain the exchange rate.. John Maynard Keynes & Milton Friedman. Module 35 Essential Questions. Why . was classical . macroeconomics . inadequate . for the problems posed by the Great . Depression?. How . did Keynes . and the experience of the Great Depression . Paul De Grauwe. The . fragility of incomplete monetary unions. Introduction. Summing up from previous lectures:. Complete monetary union. : a monetary union together with budgetary union.. Incomplete monetary union. Panel . on Monetary Policy,. Conference . on Monetary Policy. and Financial Stability in . Emerging . Markets,. NBER & Central Bank of the Republic . of . Turkey,. Istanbul, Turkey, June 13-14, 2014.