PPT-Output and the Exchange Rate in the Short Run

Chapter 17 Krugman Obstfeld and Melitz 10e ECO41 International Economics Udayan Roy Long Run and Short Run Long run theories are useful when all prices of inputs and outputs have enough time to adjust fully to changes in supply and demand. 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 . the Central Bank. Chapter 19. Exchange Rates are Volatile. Costs of Volatile Exchange Rates. Exchange rate volatility increases risk in international finance. . Ex. Many developing economy corporates issue securities in US$. An exchange rate devaluation will make this more expensive to repay. . (full adjustment of . capital,. expectations, etc.). Classical . or non-classical?. (sticky wages . and prices, rational. expectations, etc.. Classical . or non-classical?. (sticky wages . and prices, rational. Chapter 21. McGraw-Hill/Irwin. Copyright © . 2015 . by . McGraw-Hill Education (Asia). . All rights reserved.. Learning Objectives. Identify the four phases of the business cycle and explain the primary characteristics of recessions and expansions. Sections. Exchange rate arrangements. Balance of payments. Exchange rate regime, before 1976. Desired exchange rate stability.. Currencies were largely anchored, either directly or indirectly, on gold.. O’BRIEN. Money,. Banking, and. the Financial System. The Market for Foreign Exchange. C H A P T E R. 8. LEARNING OBJECTIVES. After studying this chapter, you should be able to:. 8.1. 8.2. 8.3. Explain the difference between nominal . 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.. Chapter 21. McGraw-Hill/Irwin. Copyright © . 2015 . by . McGraw-Hill Education (Asia). . All rights reserved.. Learning Objectives. Identify the four phases of the business cycle and explain the primary characteristics of recessions and expansions. Short . run and the long run. The . relationship between a firm’s output and labour employed in the short run. The . relationship between a firm’s output and costs in the short run and derive a firm’s short-run cost curves. 1966–1972. Effect on Internal and External Balance of a Rise in the Foreign (US) Price Level, . P*. The “simple” solution for the £, M, . ¥, FF, …. Revalue against the . $. Let the . $. depreciate. Explain how exchange rate movements are measured.. Explain how the equilibrium exchange rate is determined.. Examine factors that determine the equilibrium exchange rate.. Explain . the movement in cross exchange rates.. Chapter 18 . Krugman. and . Obstfeld. 9e. ECO41 International Economics. Udayan. Roy. Why Study Fixed Exchange Rates?. Four reasons to study fixed exchange rates:. Managed floating. Regional currency arrangements. Annina Kaltenbrunner, Leeds University Business School, a.kaltenbrunner@leeds.ac.uk. Daniel Perez Ruiz, Leeds University Business School, bndapr@leeds.ac.uk. Anjelo Okot, Leeds University Business School and Central Bank of Uganda, bn15ao@leeds.ac.uk. Economics. 2 Emmanuel . Saez. Fall 2024. I. Overview of Short-Run Fluctuations. Actual and Potential Real GDP in the U.S. .