This document outlines key concepts from a lecture on macroeconomic models. It introduces the IS-LM model, which describes equilibrium in the goods market (IS curve) and money markets (LM curve). The IS curve shows the relationship between interest rates, inflation, assets, output and taxes. The LM curve plots the money demand and supply. The model demonstrates the relationship between interest rates, inflation, output and the money supply/demand.
This document provides an overview of a macroeconomic model with four sectors: the product market, money market, bond market, and labor market. Key aspects of the model are presented, including the IS curve showing equilibrium in product and money markets, aggregate supply relationships, the Phillips curve, and dynamics of asset accumulation influenced by expectations. The document also provides examples and exercises to illustrate application of the macroeconomic model.
This document is a 3,524 word essay analyzing the concept of purchasing power parity (PPP). It begins by discussing the "Law of One Price" and how real-world deviations occur. It then introduces PPP and discusses attempts to test it, noting mixed results. Factors like non-tradable goods, the Balassa-Samuelson effect, and currency selection can distort PPP. While theory suggests PPP should hold, in practice it remains difficult to conclusively test due to the many variables that influence exchange rates. PPP remains a fundamental concept, but like the Higgs boson, its existence is not definitively proven.
This document discusses the monetary system and the role of money and central banking. It explains that the Federal Reserve regulates the US monetary system and controls the money supply through tools like open market operations, reserve requirements, and interest rates. Commercial banks also influence the money supply through fractional-reserve banking, where they hold a portion of deposits as reserves and lend out the rest, expanding the overall money supply through the money multiplier effect.
Chapter 14_The International Financial SystemRusman Mukhlis
The document discusses various topics related to the international financial system including:
- Types of foreign exchange rate interventions and their impact on monetary bases
- Components and purpose of a country's balance of payments
- Fixed and floating exchange rate regimes and how central banks intervene to maintain fixed rates
- Challenges of large current account deficits and the euro's challenge to the US dollar's global reserve status.
The document discusses the functions and types of money, how banks create money through fractional-reserve banking, and how the money supply is affected. It explains that money serves as a medium of exchange, unit of account, and store of value. Banks hold reserves and make loans, increasing the money supply through the money multiplier effect. The Federal Reserve uses tools like open market operations and reserve requirements to influence the money supply and inflation.
Monetary policy is the process by which a central bank like the RBI controls the supply of money and availability of money by targeting interest rates. It does this in order to achieve objectives oriented toward stable prices and maximum sustainable economic growth. Monetary policy involves either expanding or contracting the money supply by lowering or raising interest rates.
This document provides an overview of monetary policy, including its definition, objectives, tools, and role in economic growth. Monetary policy is defined as the process by which a central bank controls the supply of money in an economy, often targeting interest rates to promote growth and stability. The major objectives of monetary policy are price stability, economic growth, and stable exchange rates. The key tools of monetary policy are open market operations, bank rates, cash reserve ratios, and credit controls. Monetary policy aims to influence aggregate demand and output through expanding or contracting the money supply.
Monetary policy is used by central banks to control the supply of money and regulate credit in order to promote economic growth and stability. There are two types: expansionary policy aims to reduce unemployment by increasing the money supply during recessions, while contractionary policy aims to reduce inflation by decreasing the money supply during expansions. The tools for changing the money supply include open market operations, interest rates, and reserve ratios.
This document provides an overview of a macroeconomic model with four sectors: the product market, money market, bond market, and labor market. Key aspects of the model are presented, including the IS curve showing equilibrium in product and money markets, aggregate supply relationships, the Phillips curve, and dynamics of asset accumulation influenced by expectations. The document also provides examples and exercises to illustrate application of the macroeconomic model.
This document is a 3,524 word essay analyzing the concept of purchasing power parity (PPP). It begins by discussing the "Law of One Price" and how real-world deviations occur. It then introduces PPP and discusses attempts to test it, noting mixed results. Factors like non-tradable goods, the Balassa-Samuelson effect, and currency selection can distort PPP. While theory suggests PPP should hold, in practice it remains difficult to conclusively test due to the many variables that influence exchange rates. PPP remains a fundamental concept, but like the Higgs boson, its existence is not definitively proven.
This document discusses the monetary system and the role of money and central banking. It explains that the Federal Reserve regulates the US monetary system and controls the money supply through tools like open market operations, reserve requirements, and interest rates. Commercial banks also influence the money supply through fractional-reserve banking, where they hold a portion of deposits as reserves and lend out the rest, expanding the overall money supply through the money multiplier effect.
Chapter 14_The International Financial SystemRusman Mukhlis
The document discusses various topics related to the international financial system including:
- Types of foreign exchange rate interventions and their impact on monetary bases
- Components and purpose of a country's balance of payments
- Fixed and floating exchange rate regimes and how central banks intervene to maintain fixed rates
- Challenges of large current account deficits and the euro's challenge to the US dollar's global reserve status.
The document discusses the functions and types of money, how banks create money through fractional-reserve banking, and how the money supply is affected. It explains that money serves as a medium of exchange, unit of account, and store of value. Banks hold reserves and make loans, increasing the money supply through the money multiplier effect. The Federal Reserve uses tools like open market operations and reserve requirements to influence the money supply and inflation.
Monetary policy is the process by which a central bank like the RBI controls the supply of money and availability of money by targeting interest rates. It does this in order to achieve objectives oriented toward stable prices and maximum sustainable economic growth. Monetary policy involves either expanding or contracting the money supply by lowering or raising interest rates.
This document provides an overview of monetary policy, including its definition, objectives, tools, and role in economic growth. Monetary policy is defined as the process by which a central bank controls the supply of money in an economy, often targeting interest rates to promote growth and stability. The major objectives of monetary policy are price stability, economic growth, and stable exchange rates. The key tools of monetary policy are open market operations, bank rates, cash reserve ratios, and credit controls. Monetary policy aims to influence aggregate demand and output through expanding or contracting the money supply.
Monetary policy is used by central banks to control the supply of money and regulate credit in order to promote economic growth and stability. There are two types: expansionary policy aims to reduce unemployment by increasing the money supply during recessions, while contractionary policy aims to reduce inflation by decreasing the money supply during expansions. The tools for changing the money supply include open market operations, interest rates, and reserve ratios.
The document summarizes the evolution of international monetary systems from the classic gold standard period until present day. It describes key features and stages including the Bretton Woods system established in 1944 that pegged currencies to the US dollar, which was convertible to gold. However, the system collapsed in 1971 when the US abandoned the gold standard due to an excess of dollars held abroad.
The document provides an overview of the international monetary system, including:
1) The evolution of international monetary systems from bimetallism to the classical gold standard to the Bretton Woods system to the current flexible exchange rate regime.
2) Current exchange rate arrangements including free float, managed float, and currencies pegged to other currencies.
3) Details on the euro and European monetary union.
4) Examples of currency crises like the Mexican peso crisis, Asian currency crisis, and Argentine peso crisis.
5) Differences between fixed and flexible exchange rate regimes and how imbalances are addressed under each system.
The document summarizes India's monetary policy. It discusses the goals of monetary policy as achieving low and stable inflation while promoting economic growth. It outlines the various interest rates set by the Reserve Bank of India and tools used to regulate money supply such as cash reserve ratio and statutory liquidity ratio. While monetary policy can help reduce inflation and stabilize the economy, it has limitations in predicting inflationary pressures and ensuring long-term growth. The document concludes by emphasizing the need for monetary policy to support agricultural growth, infrastructure development, and other priorities to ensure inclusive development.
Monetary policy uses tools like interest rates and money supply to influence economic outcomes like growth, inflation, exchange rates, and unemployment. The objectives of monetary policy are price stability, credit availability, exchange rate stability, full employment, and high economic growth. The tools available to central banks include open market operations, changing reserve requirements, and setting bank interest rates like the discount rate. How monetary policy works is by influencing the cost of borrowing - lower rates encourage more spending, saving, and investment in assets like property and stocks.
The document discusses India's monetary policy, which is controlled by the Reserve Bank of India (RBI). The RBI announces monetary policy twice per year to regulate price stability in the economy. Monetary policy aims to influence economic growth, employment, credit flows, and price stability through tools like bank rates, open market operations, cash reserve ratios, and statutory liquidity ratios. It can impact consumption, investment, exports and imports. Limitations include non-monetized sectors, non-banking institutions, and lack of coordination with fiscal policy. The current monetary policy rates in India are outlined.
Monetary policy aims to control the money supply and interest rates to promote economic growth and stability. The objectives of monetary policy differ for developed and underdeveloped countries. Underdeveloped countries aim to achieve full employment and economic growth, while developed countries focus on high demand without inflation. Monetary policy tools include open market operations, required reserves, and interest rates. Central banks target variables like money supply and interest rates to indirectly influence macroeconomic goals like inflation and growth. The State Bank of Pakistan has utilized tight and easy monetary stances over the years in response to economic conditions, aiming to balance objectives like inflation, growth, and stability.
This document discusses monetary policy and how it is used by central banks to control the supply of money and achieve goals such as price stability. It describes expansionary and contractionary monetary policy and how central banks use tools like open market operations and adjusting required reserve ratios. Open market operations work by buying or selling government bonds to commercial banks and the public to increase or decrease bank reserves and the overall money supply. The goals of monetary policy are outlined as price stability, high employment, economic growth, stability of financial markets, and stability in foreign exchange markets.
The international monetary system refers to the set of rules and institutions that facilitate international trade and investment. Historically, there have been several international monetary systems, including bimetallism, the classic gold standard, and the Bretton Woods system. The classic gold standard from 1879-1914 tied currencies to gold, allowing for fixed exchange rates and free capital movement. However, it lacked mechanisms for stabilizing global prices and suffered from economic volatility.
The document discusses the evolution of international monetary systems throughout history. It begins by defining money and its three main functions. It then outlines several international monetary systems: bimetallism before 1875; the classical gold standard from 1875-1914; the unstable interwar period from 1915-1944; the Bretton Woods system from 1945-1972, which pegged currencies to the US dollar; and the current flexible exchange rate regime since 1973. The Bretton Woods system collapsed in the early 1970s due to US economic policies undermining the dollar-gold peg. Overall, the document traces the progression of global exchange rate regimes over time.
Mgnt 4670 Ch 11 Intl Monetary System (Fall 2007)knksmart
The international monetary system describes the structure through which exchange rates are determined, trade and capital flows occur, and balance of payments adjustments are made. It includes fixed and floating exchange rate systems, as well as the roles of central banks and reasons for each type of system. Over time, the system has evolved from early forms of money and bartering to the gold standard, Bretton Woods system of fixed rates tied to the US dollar, and currently a mixed system with major currencies floating and others using fixed or managed rates.
Mgnt 4670 Ch 11 Intl Monetary System (Fall 2007)knksmart
The international monetary system describes the structure through which exchange rates are determined, trade and capital flows occur, and balance of payments adjustments are made. It includes fixed and floating exchange rate systems, as well as the roles of central banks and reasons for each type of system. Over time, the system has evolved from early forms of localized money to the post-World War 2 Bretton Woods system of fixed rates tied to the U.S. dollar and gold, and now a mixed system with major currencies floating and various arrangements for other currencies.
The document summarizes the evolution of the international monetary system from the late 19th century to present day. It describes the periods of bimetallism, the classical gold standard, the interwar period, the Bretton Woods system, and the flexible exchange rate system established in 1973. Key events discussed include the end of the gold standard in 1914 due to WWI, the establishment of the IMF and World Bank at Bretton Woods in 1944, and the collapse of the Bretton Woods system in the early 1970s.
This document discusses the history and functions of money. It covers the early use of coins and precious metals as a standardized medium of exchange starting in ancient Greece and Rome. It describes problems that arose from debasing coin values and lack of stable currencies in the Middle Ages. The document also discusses the development of the quantity theory of money in the 18th century, adoption of the gold standard in the 19th century, and the end of the gold standard after World War I.
This document discusses the history and functions of money. It covers the early use of coins and precious metals as a standardized medium of exchange starting in ancient Greece and Rome. It describes problems that arose from debasing coin values and lack of stable currencies in the Middle Ages. The document also discusses the development of the quantity theory of money in the 18th century, adoption of the gold standard in the 19th century, and the end of the gold standard after World War I.
This document provides an overview of international monetary systems and exchange rate arrangements. It begins with a brief history, starting from bimetalism pre-1875, to the classical gold standard from 1875-1914, the interwar period, Bretton Woods system from 1945-1972, and the current flexible system. It then describes different types of exchange rate systems such as freely floating rates, managed floats, target zones, and fixed rates. Specific historical systems like the gold standard and Bretton Woods are explained in more detail. In summary, the document outlines the evolution of international monetary arrangements over time from commodity-backed systems to present-day mixed systems.
The document discusses the history and mechanics of the gold standard. It describes the classical gold standard from 1815-1914 where currency was pegged to a fixed amount of gold. It then explains the gold-exchange standards from 1926-1931 and 1945-1968 where the US dollar was pegged to gold which other currencies were pegged to. The document outlines pros and cons of the gold standard, such as its role in controlling inflation but also how it favors storing value over using money and can cause deflationary crashes. It questions whether returning to the gold standard would be appropriate today.
International monetary systems provide means of payment between buyers and sellers of different nationalities and facilitate international trade and investment. They have evolved over five stages: 1) Bimetallism before 1875 used both gold and silver coins but was unstable, 2) the Classical gold standard from 1875-1914 tied currencies to gold, 3) the Interwar period from 1915-1944 saw suspension of the gold standard and competitive currency depreciation, 4) the Bretton Woods system from 1945-1972 established the IMF and pegged currencies to the US dollar and gold, and 5) the Flexible exchange rate system since 1973 allows currencies to float against each other after the collapse of Bretton Woods.
Mundell Financial Crises And The Intl Monetary Systembartonp
This document provides an overview of the evolution of international monetary systems and financial crises. It discusses the Bretton Woods system, the move to floating exchange rates in the 1970s, and crises under fluctuating rates. It then covers the creation of the euro and the 2007-2009 financial crisis. The crisis originated from securitization of mortgages and financial innovations, and came to a head in September 2008 with the collapse of Lehman Brothers, drying up credit markets.
The document outlines the history and evolution of international monetary systems from bimetallism before 1875 to the current flexible exchange rate regime. It describes the classical gold standard period from 1875-1914, the instability of exchange rates during the interwar period, the Bretton Woods system which pegged currencies to the US dollar and gold from 1945-1972, and the demise of Bretton Woods leading to floating exchange rates today. The different stages established rules for exchange rates and the flow of trade and capital between nations under the prevailing monetary arrangements.
The document discusses the evolution of international monetary systems over time. It begins by defining money and its functions, then outlines several stages of international monetary systems: bimetallism before 1875, the classical gold standard from 1875-1914, the interwar period from 1915-1944, the Bretton Woods system from 1945-1972, and the current flexible exchange rate regime from 1973 onward. Each system is described in terms of the prevailing rules, features, and reasons for changes or demise over time. In particular, it focuses on the shift from the Bretton Woods dollar-pegged system to the current floating rate regime in the early 1970s.
The international monetary system refers to the institutionalBlue Angel
This document provides an overview of the evolution of international monetary systems from the gold standard to the present day floating exchange rate system. It discusses key aspects of the gold standard (1880-1914), the Bretton Woods system of fixed exchange rates (1944-1973), and the current floating exchange rate regime established in 1973. The Bretton Woods system established the IMF and World Bank and involved countries fixing their currencies to the US dollar, which was convertible to gold. It collapsed in the 1970s due to US economic policies and Germany allowing its currency to float. The current system allows exchange rates to fluctuate based on market forces.
The document summarizes the evolution of international monetary systems from the classic gold standard period until present day. It describes key features and stages including the Bretton Woods system established in 1944 that pegged currencies to the US dollar, which was convertible to gold. However, the system collapsed in 1971 when the US abandoned the gold standard due to an excess of dollars held abroad.
The document provides an overview of the international monetary system, including:
1) The evolution of international monetary systems from bimetallism to the classical gold standard to the Bretton Woods system to the current flexible exchange rate regime.
2) Current exchange rate arrangements including free float, managed float, and currencies pegged to other currencies.
3) Details on the euro and European monetary union.
4) Examples of currency crises like the Mexican peso crisis, Asian currency crisis, and Argentine peso crisis.
5) Differences between fixed and flexible exchange rate regimes and how imbalances are addressed under each system.
The document summarizes India's monetary policy. It discusses the goals of monetary policy as achieving low and stable inflation while promoting economic growth. It outlines the various interest rates set by the Reserve Bank of India and tools used to regulate money supply such as cash reserve ratio and statutory liquidity ratio. While monetary policy can help reduce inflation and stabilize the economy, it has limitations in predicting inflationary pressures and ensuring long-term growth. The document concludes by emphasizing the need for monetary policy to support agricultural growth, infrastructure development, and other priorities to ensure inclusive development.
Monetary policy uses tools like interest rates and money supply to influence economic outcomes like growth, inflation, exchange rates, and unemployment. The objectives of monetary policy are price stability, credit availability, exchange rate stability, full employment, and high economic growth. The tools available to central banks include open market operations, changing reserve requirements, and setting bank interest rates like the discount rate. How monetary policy works is by influencing the cost of borrowing - lower rates encourage more spending, saving, and investment in assets like property and stocks.
The document discusses India's monetary policy, which is controlled by the Reserve Bank of India (RBI). The RBI announces monetary policy twice per year to regulate price stability in the economy. Monetary policy aims to influence economic growth, employment, credit flows, and price stability through tools like bank rates, open market operations, cash reserve ratios, and statutory liquidity ratios. It can impact consumption, investment, exports and imports. Limitations include non-monetized sectors, non-banking institutions, and lack of coordination with fiscal policy. The current monetary policy rates in India are outlined.
Monetary policy aims to control the money supply and interest rates to promote economic growth and stability. The objectives of monetary policy differ for developed and underdeveloped countries. Underdeveloped countries aim to achieve full employment and economic growth, while developed countries focus on high demand without inflation. Monetary policy tools include open market operations, required reserves, and interest rates. Central banks target variables like money supply and interest rates to indirectly influence macroeconomic goals like inflation and growth. The State Bank of Pakistan has utilized tight and easy monetary stances over the years in response to economic conditions, aiming to balance objectives like inflation, growth, and stability.
This document discusses monetary policy and how it is used by central banks to control the supply of money and achieve goals such as price stability. It describes expansionary and contractionary monetary policy and how central banks use tools like open market operations and adjusting required reserve ratios. Open market operations work by buying or selling government bonds to commercial banks and the public to increase or decrease bank reserves and the overall money supply. The goals of monetary policy are outlined as price stability, high employment, economic growth, stability of financial markets, and stability in foreign exchange markets.
The international monetary system refers to the set of rules and institutions that facilitate international trade and investment. Historically, there have been several international monetary systems, including bimetallism, the classic gold standard, and the Bretton Woods system. The classic gold standard from 1879-1914 tied currencies to gold, allowing for fixed exchange rates and free capital movement. However, it lacked mechanisms for stabilizing global prices and suffered from economic volatility.
The document discusses the evolution of international monetary systems throughout history. It begins by defining money and its three main functions. It then outlines several international monetary systems: bimetallism before 1875; the classical gold standard from 1875-1914; the unstable interwar period from 1915-1944; the Bretton Woods system from 1945-1972, which pegged currencies to the US dollar; and the current flexible exchange rate regime since 1973. The Bretton Woods system collapsed in the early 1970s due to US economic policies undermining the dollar-gold peg. Overall, the document traces the progression of global exchange rate regimes over time.
Mgnt 4670 Ch 11 Intl Monetary System (Fall 2007)knksmart
The international monetary system describes the structure through which exchange rates are determined, trade and capital flows occur, and balance of payments adjustments are made. It includes fixed and floating exchange rate systems, as well as the roles of central banks and reasons for each type of system. Over time, the system has evolved from early forms of money and bartering to the gold standard, Bretton Woods system of fixed rates tied to the US dollar, and currently a mixed system with major currencies floating and others using fixed or managed rates.
Mgnt 4670 Ch 11 Intl Monetary System (Fall 2007)knksmart
The international monetary system describes the structure through which exchange rates are determined, trade and capital flows occur, and balance of payments adjustments are made. It includes fixed and floating exchange rate systems, as well as the roles of central banks and reasons for each type of system. Over time, the system has evolved from early forms of localized money to the post-World War 2 Bretton Woods system of fixed rates tied to the U.S. dollar and gold, and now a mixed system with major currencies floating and various arrangements for other currencies.
The document summarizes the evolution of the international monetary system from the late 19th century to present day. It describes the periods of bimetallism, the classical gold standard, the interwar period, the Bretton Woods system, and the flexible exchange rate system established in 1973. Key events discussed include the end of the gold standard in 1914 due to WWI, the establishment of the IMF and World Bank at Bretton Woods in 1944, and the collapse of the Bretton Woods system in the early 1970s.
This document discusses the history and functions of money. It covers the early use of coins and precious metals as a standardized medium of exchange starting in ancient Greece and Rome. It describes problems that arose from debasing coin values and lack of stable currencies in the Middle Ages. The document also discusses the development of the quantity theory of money in the 18th century, adoption of the gold standard in the 19th century, and the end of the gold standard after World War I.
This document discusses the history and functions of money. It covers the early use of coins and precious metals as a standardized medium of exchange starting in ancient Greece and Rome. It describes problems that arose from debasing coin values and lack of stable currencies in the Middle Ages. The document also discusses the development of the quantity theory of money in the 18th century, adoption of the gold standard in the 19th century, and the end of the gold standard after World War I.
This document provides an overview of international monetary systems and exchange rate arrangements. It begins with a brief history, starting from bimetalism pre-1875, to the classical gold standard from 1875-1914, the interwar period, Bretton Woods system from 1945-1972, and the current flexible system. It then describes different types of exchange rate systems such as freely floating rates, managed floats, target zones, and fixed rates. Specific historical systems like the gold standard and Bretton Woods are explained in more detail. In summary, the document outlines the evolution of international monetary arrangements over time from commodity-backed systems to present-day mixed systems.
The document discusses the history and mechanics of the gold standard. It describes the classical gold standard from 1815-1914 where currency was pegged to a fixed amount of gold. It then explains the gold-exchange standards from 1926-1931 and 1945-1968 where the US dollar was pegged to gold which other currencies were pegged to. The document outlines pros and cons of the gold standard, such as its role in controlling inflation but also how it favors storing value over using money and can cause deflationary crashes. It questions whether returning to the gold standard would be appropriate today.
International monetary systems provide means of payment between buyers and sellers of different nationalities and facilitate international trade and investment. They have evolved over five stages: 1) Bimetallism before 1875 used both gold and silver coins but was unstable, 2) the Classical gold standard from 1875-1914 tied currencies to gold, 3) the Interwar period from 1915-1944 saw suspension of the gold standard and competitive currency depreciation, 4) the Bretton Woods system from 1945-1972 established the IMF and pegged currencies to the US dollar and gold, and 5) the Flexible exchange rate system since 1973 allows currencies to float against each other after the collapse of Bretton Woods.
Mundell Financial Crises And The Intl Monetary Systembartonp
This document provides an overview of the evolution of international monetary systems and financial crises. It discusses the Bretton Woods system, the move to floating exchange rates in the 1970s, and crises under fluctuating rates. It then covers the creation of the euro and the 2007-2009 financial crisis. The crisis originated from securitization of mortgages and financial innovations, and came to a head in September 2008 with the collapse of Lehman Brothers, drying up credit markets.
The document outlines the history and evolution of international monetary systems from bimetallism before 1875 to the current flexible exchange rate regime. It describes the classical gold standard period from 1875-1914, the instability of exchange rates during the interwar period, the Bretton Woods system which pegged currencies to the US dollar and gold from 1945-1972, and the demise of Bretton Woods leading to floating exchange rates today. The different stages established rules for exchange rates and the flow of trade and capital between nations under the prevailing monetary arrangements.
The document discusses the evolution of international monetary systems over time. It begins by defining money and its functions, then outlines several stages of international monetary systems: bimetallism before 1875, the classical gold standard from 1875-1914, the interwar period from 1915-1944, the Bretton Woods system from 1945-1972, and the current flexible exchange rate regime from 1973 onward. Each system is described in terms of the prevailing rules, features, and reasons for changes or demise over time. In particular, it focuses on the shift from the Bretton Woods dollar-pegged system to the current floating rate regime in the early 1970s.
The international monetary system refers to the institutionalBlue Angel
This document provides an overview of the evolution of international monetary systems from the gold standard to the present day floating exchange rate system. It discusses key aspects of the gold standard (1880-1914), the Bretton Woods system of fixed exchange rates (1944-1973), and the current floating exchange rate regime established in 1973. The Bretton Woods system established the IMF and World Bank and involved countries fixing their currencies to the US dollar, which was convertible to gold. It collapsed in the 1970s due to US economic policies and Germany allowing its currency to float. The current system allows exchange rates to fluctuate based on market forces.
This document provides an overview and introduction to an International Finance course. It outlines the course details including the required textbook and assessment breakdown. It introduces the instructor, John Nowland, and provides his contact details. Finally, it previews the first two chapters which will cover the international monetary system and why international finance is an important topic.
Cambridge University Press and Economic History Association a.docxShiraPrater50
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Economic History Association
The Economic Crisis of 1619 to 1623
Author(s): Charles P. Kindleberger
Source: The Journal of Economic History, Vol. 51, No. 1 (Mar., 1991), pp. 149-175
Published by: on behalf of the Cambridge University Press Economic History Association
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The Economic Crisis of 1619 to 1623
CHARLES P. KINDLEBERGER
Various states in the Holy Roman Empire prepared for the Thirty Years' War by
creating new mints and debasing the subsidiary coinage. The process spread
through Gresham's Law: bad money was taken by debasing states to their
neighbors and exchanged for good. The neighbor typically defended itself by
debasing its own coin. The resulting hyperinflation was terminated early in the
war by an agreement to return to the Imperial Augsburg Ordinance of 1559. The
Kipper- und Wipperzeit, as the period is called, illuminates the geographic spread
of financial crises, German hyperinflations of this century, and current proposals
for "free banking."
INTRODUCTION
The first quarter of the seventeenth century, up to and through the
beginnings of the Thirty Years' War with the defenestration at
Prague in 1618, has been widely described as a period of crisis. The
crisis was particularly acute between 1619 and 1623; sometimes and in
particular localities it was described as a "commercial crisis," some-
times as a "joint crisis in commerce and industry," but usually as a
"currency crisis" and in one instance as a ''monetary crisis and panic"
and even "a monetary corner."' Moreover, it was set within a deeper
structural crisis covering 100 to 150 years of transition from medieval to
modern times. The period has been variously described as a movement
from feudalism to capitalism; from a feudal to a nation-state society;
from the political and economic ascendency of the South (Italy and
Spain) to that of the North (the United Provinces of Holland and
England); from a "natural economy" based on the self-sufficient
household and barter to the use of markets and money; from separate
deals to continuous trade on bourses; and from th ...
Your Optimal Precious Metals Strategy
Investing in precious metals can act as a hedge against economic turmoil. Gold has been the universal symbol of wealth for civilizations throughout the ages. Ancient cultures created gold jewelry and early forms of money were crafted from gold.
In this presentation Liiivo Leismann shares some important and critical ideas regarding precious metals and their potential as an investment.
Find out more: http:/www.inflationproofinvestor.com
The document discusses the evolution of international monetary systems from early systems of bimetallism up to the current flexible exchange rate regime. Key points include:
- Under bimetallism before 1875, both gold and silver were used internationally as money with Gresham's Law implying the least valuable metal would circulate.
- The classical gold standard from 1875-1914 established gold as the primary global reserve asset with currencies pegged to gold and exchange rates determined by relative gold contents.
- The interwar period saw the breakdown of the gold standard and widespread currency devaluations.
- The Bretton Woods system from 1945-1972 pegged currencies to the U.S. dollar which was peg
The document summarizes the monetary history of Europe from pre-17th century to the present. It describes how currencies originally used metals but bills of exchange later emerged. Public banks were established in the 17th-18th centuries in Amsterdam and London. The 19th century saw continued use of bills of exchange and the designation of certain currencies as legal tender within countries. The gold standard period from the late 19th century was unstable. Post-WWI and WWII attempts to restore monetary order included the Bretton Woods system and the European Monetary System (EMS), which evolved from a symmetrical system to one centered around the German Deutsche Mark.
Similar to International Monetary Economics, EC6012 Lecture 2 ISLM and Beyond (20)
Stock Flow Consistent Models and Agent Based ModelsStephen Kinsella
This document provides an overview of Stephen Kinsella's work on building a Stock Flow Consistent (SFC) macroeconomic model combined with an Agent Based Model (ABM). The goal is to create a policy evaluation model comparable to those used by central banks. It will include heterogeneous agents from different sectors (households, firms, banks, government) that interact according to simple behavioral rules. The model aims to better understand economic crises without relying on representative agent or rational expectations assumptions. Further work includes building a benchmark model, studying agent mobility, and numerical techniques for simulating large SFC models.
This document provides context for a presentation on stock flow consistent models and agent based models. It discusses the stock flow consistent methodology, which models the economy based on flows of funds between sectors using balance sheets and transaction matrices. The goal is to build macroeconomic models that are internally consistent and can be used to simulate policy experiments. Two applications are discussed: an Irish macroeconomic model that looks at the economy from a balance sheet perspective, and an earlier stock flow consistent agent based model. Further work plans to estimate these types of models.
This document discusses government budgets and taxation. It explains that budgets help governments plan for services by making educated guesses about revenues and expenditures. When expenditures exceed revenues, the government must borrow to cover the difference. It also discusses different types of taxes like income tax, VAT, and carbon taxes. The future may include more property and water taxes as the government aims to reduce borrowing. The document considers different perspectives on taxes and whether all families should receive the same child benefit amount.
This document analyzes the linkages between different sectors of the Irish economy that contributed to the financial crisis. It discusses 3 key linkages: 1) How rising household credit led to rising debt levels. 2) How private sector debt accumulated and was transferred to the public sector balance sheet. 3) How expectations of continued growth were not met with reality as the economy entered a demand-deficient recession. The document uses charts and data to show trends in household borrowing, debt, asset prices, unemployment and other economic indicators to demonstrate these interlinkages and how Ireland's crisis emerged.
The document discusses issues related to funding for small and medium enterprises (SMEs) in Ireland, noting that access to credit is a key problem for SMEs but that learning to thrive in a low demand, low credit environment is also important. It provides context on Ireland's economic downturn following the financial crisis and argues that policy should be redirected towards initiatives that support SMEs, as businesses of all sizes can help reduce unemployment. Data is presented on lending to SMEs, wages by firm size and nationality, and an estimate of approximately €100 million per year needed in SME credit.
This document summarizes research on financial regulation from a European perspective conducted by Stephen Kinsella and Vincent O'Sullivan from UL. It provides an overview of their projects modeling interactions between financial regulation and EU macroeconomic balance sheets from 1980-2012. It proposes alternative risk management mechanisms for the Irish case but generalizable to the EU situation. The document lists several of their selected publications on topics like the Irish banking crisis, UK regulatory reform, and the EU recapitalization proposals. It outlines areas for further research and the implications of lacking rigorous macroeconomic analysis to accompany new financial regulations in Europe. Finally, it provides context on why financial regulation has become an important topic and defines key concepts like what regulation aims to do and reasons for
1. Ireland experienced strong economic growth from 2006-2007 but then suffered a severe economic downturn from 2008-2009 as the global financial crisis hit. GDP and GNP declined sharply.
2. The document discusses whether Ireland's program of austerity measures is the appropriate policy response or "role model" for other countries like Greece experiencing economic crises.
3. The author analyzes Ireland's economic data from 2006-2012 and unemployment levels over time to evaluate the effects of austerity and debate if it is the right approach for recovery.
This document discusses the history and development of Limerick from the 1860s to today. It analyzes theories of urban development and the logic of post-war export-led growth. It argues that Limerick can no longer rely on large employers to provide jobs and must find new sources of economic growth and consumption. The document proposes that the University of Limerick invest in infrastructure projects to stimulate the local economy during stagnation and help revitalize the city center.
The document provides instructions for students on completing a peer review assignment using Turnitin. It outlines that students must submit their paper and peer reviews by certain deadlines. For the peer review, students are asked to evaluate four areas - organization, referencing, grammar/style, and content. They must provide feedback and recommend a grade for the papers they review. The document also provides the Turnitin class ID and enrollment password needed to set up an account, how to submit a paper, and how to access and complete the peer reviews.
The document discusses Ireland's budget challenges over the past several years. It shows graphs of government spending and revenues from 2000-2015 that illustrate growing deficits as spending exceeded revenues. It notes Ireland had to undertake a 4-year plan with the EU/IMF to reduce borrowing and get public finances under control. Key points in budgets from 2009-2011 included slashing capital investment, providing flood relief funds, introducing tax breaks for startups, and considering pension and carbon tax reforms.
The document discusses different types of tariffs such as import tariffs, export tariffs, ad valorem tariffs, and specific tariffs. It analyzes the effects of tariffs on small and large countries, finding that tariffs typically result in deadweight welfare losses for small countries but can potentially increase welfare for large countries through improvements in their terms of trade. However, the optimal tariff theory does not consider the likelihood of retaliation from other countries in response to new tariffs.
This study calculated the total cost of keeping one extremely low birth weight infant alive in the hospital for 212 days to be €611,497.38, with a marginal cost of an extra week of life being €8531. The researchers gathered highly detailed cost data from 176 variables recorded in the patient's case and assigned unit costs to calculate total, variable, fixed, and marginal daily costs - finding that the cost was much higher than estimates from other studies in the UK and US.
Ireland has experienced an unprecedented economic downturn that has wiped out much of the wealth gained in recent years. The recent budget outlined further cuts and austerity measures to address fiscal issues. Long-term challenges include an aging population, climate change, and pension funding that will require massive investment in infrastructure to stimulate the economy and prepare for the future. Municipal bonds are proposed as a mechanism to fund this needed infrastructure spending.
US & EU Linkages: How did they contribute to the crisis?Stephen Kinsella
1. The current banking crisis is best explained by the history of financial regulation, which allowed strong linkages between the US and EU systems that amplified the crisis.
2. Linkages between the US and EU financial systems through international debt markets were much stronger in the current crisis compared to previous crises, exacerbating the problems.
3. Implementation of new financial regulations may not be sufficient to prevent another major crisis in the 2020s, as credit markets have a tendency to breed their own downfall through increasing leverage and risky lending, according to Minsky's theories on financial instability.
Social Media as a Bridge between Teaching and ResearchStephen Kinsella
Here's a talk I gave on Tuesday to a symposium on Social Media with Prof. Gerry McKiernan, revolving around using social media tools like this blog, the text messaging software, and The Twitter, etc, to communicate and interact with my students.
A Matching Model with Friction and Multiple CriteriaStephen Kinsella
We present a model of matching based on two character measures.
There are two classes of individual. Each individual
observes a sequence of potential partners from the opposite class.
One
measure describes the "attractiveness" of an individual.
Preferences are common according to
this measure: i.e. each individual prefers highly attractive partners and all individuals
of a given class agree as to how attractive individuals of the opposite class are. Preferences are
homotypic with respect to the second measure, referred to as "character" i.e.
all individuals prefer partners of a similar character.
Such a problem may be interpreted as e.g. a job search problem in which the classes
are employer and employee, or a mate choice problem in which the classes are male and
female.
It is assumed that
attractiveness is easy to measure and observable with certainty. However,
in order to observe the character of an individual, an interview (or courtship) is required.
Hence, on observing the attractiveness of a prospective partner an individual must decide whether he/she wishes
to proceed to the interview stage. Interviews only occur by mutual consent. A pair can only be formed
after an interview. During the interview phase the prospective pair
observe each other's
character, and then decide whether they wish to form a pair.
It is assumed that mutual acceptance is required for pair formation to
occur. An individual stops searching on finding a partner.
This paper
presents a general model of such a matching process. A particular case is
considered in which character "forms a ring" and has a uniform distribution.
A set of criteria based on the concept of a subgame
perfect Nash equilibrium is used to define the solution of this particular game. It is shown that
such a solution is unique. The general form of the solution is derived and a procedure for finding
the solution of such a game is given.
Thinking of getting a dog? Be aware that breeds like Pit Bulls, Rottweilers, and German Shepherds can be loyal and dangerous. Proper training and socialization are crucial to preventing aggressive behaviors. Ensure safety by understanding their needs and always supervising interactions. Stay safe, and enjoy your furry friends!
June 3, 2024 Anti-Semitism Letter Sent to MIT President Kornbluth and MIT Cor...Levi Shapiro
Letter from the Congress of the United States regarding Anti-Semitism sent June 3rd to MIT President Sally Kornbluth, MIT Corp Chair, Mark Gorenberg
Dear Dr. Kornbluth and Mr. Gorenberg,
The US House of Representatives is deeply concerned by ongoing and pervasive acts of antisemitic
harassment and intimidation at the Massachusetts Institute of Technology (MIT). Failing to act decisively to ensure a safe learning environment for all students would be a grave dereliction of your responsibilities as President of MIT and Chair of the MIT Corporation.
This Congress will not stand idly by and allow an environment hostile to Jewish students to persist. The House believes that your institution is in violation of Title VI of the Civil Rights Act, and the inability or
unwillingness to rectify this violation through action requires accountability.
Postsecondary education is a unique opportunity for students to learn and have their ideas and beliefs challenged. However, universities receiving hundreds of millions of federal funds annually have denied
students that opportunity and have been hijacked to become venues for the promotion of terrorism, antisemitic harassment and intimidation, unlawful encampments, and in some cases, assaults and riots.
The House of Representatives will not countenance the use of federal funds to indoctrinate students into hateful, antisemitic, anti-American supporters of terrorism. Investigations into campus antisemitism by the Committee on Education and the Workforce and the Committee on Ways and Means have been expanded into a Congress-wide probe across all relevant jurisdictions to address this national crisis. The undersigned Committees will conduct oversight into the use of federal funds at MIT and its learning environment under authorities granted to each Committee.
• The Committee on Education and the Workforce has been investigating your institution since December 7, 2023. The Committee has broad jurisdiction over postsecondary education, including its compliance with Title VI of the Civil Rights Act, campus safety concerns over disruptions to the learning environment, and the awarding of federal student aid under the Higher Education Act.
• The Committee on Oversight and Accountability is investigating the sources of funding and other support flowing to groups espousing pro-Hamas propaganda and engaged in antisemitic harassment and intimidation of students. The Committee on Oversight and Accountability is the principal oversight committee of the US House of Representatives and has broad authority to investigate “any matter” at “any time” under House Rule X.
• The Committee on Ways and Means has been investigating several universities since November 15, 2023, when the Committee held a hearing entitled From Ivory Towers to Dark Corners: Investigating the Nexus Between Antisemitism, Tax-Exempt Universities, and Terror Financing. The Committee followed the hearing with letters to those institutions on January 10, 202
How to Fix the Import Error in the Odoo 17Celine George
An import error occurs when a program fails to import a module or library, disrupting its execution. In languages like Python, this issue arises when the specified module cannot be found or accessed, hindering the program's functionality. Resolving import errors is crucial for maintaining smooth software operation and uninterrupted development processes.
বাংলাদেশের অর্থনৈতিক সমীক্ষা ২০২৪ [Bangladesh Economic Review 2024 Bangla.pdf] কম্পিউটার , ট্যাব ও স্মার্ট ফোন ভার্সন সহ সম্পূর্ণ বাংলা ই-বুক বা pdf বই " সুচিপত্র ...বুকমার্ক মেনু 🔖 ও হাইপার লিংক মেনু 📝👆 যুক্ত ..
আমাদের সবার জন্য খুব খুব গুরুত্বপূর্ণ একটি বই ..বিসিএস, ব্যাংক, ইউনিভার্সিটি ভর্তি ও যে কোন প্রতিযোগিতা মূলক পরীক্ষার জন্য এর খুব ইম্পরট্যান্ট একটি বিষয় ...তাছাড়া বাংলাদেশের সাম্প্রতিক যে কোন ডাটা বা তথ্য এই বইতে পাবেন ...
তাই একজন নাগরিক হিসাবে এই তথ্য গুলো আপনার জানা প্রয়োজন ...।
বিসিএস ও ব্যাংক এর লিখিত পরীক্ষা ...+এছাড়া মাধ্যমিক ও উচ্চমাধ্যমিকের স্টুডেন্টদের জন্য অনেক কাজে আসবে ...
A Strategic Approach: GenAI in EducationPeter Windle
Artificial Intelligence (AI) technologies such as Generative AI, Image Generators and Large Language Models have had a dramatic impact on teaching, learning and assessment over the past 18 months. The most immediate threat AI posed was to Academic Integrity with Higher Education Institutes (HEIs) focusing their efforts on combating the use of GenAI in assessment. Guidelines were developed for staff and students, policies put in place too. Innovative educators have forged paths in the use of Generative AI for teaching, learning and assessments leading to pockets of transformation springing up across HEIs, often with little or no top-down guidance, support or direction.
This Gasta posits a strategic approach to integrating AI into HEIs to prepare staff, students and the curriculum for an evolving world and workplace. We will highlight the advantages of working with these technologies beyond the realm of teaching, learning and assessment by considering prompt engineering skills, industry impact, curriculum changes, and the need for staff upskilling. In contrast, not engaging strategically with Generative AI poses risks, including falling behind peers, missed opportunities and failing to ensure our graduates remain employable. The rapid evolution of AI technologies necessitates a proactive and strategic approach if we are to remain relevant.
Macroeconomics- Movie Location
This will be used as part of your Personal Professional Portfolio once graded.
Objective:
Prepare a presentation or a paper using research, basic comparative analysis, data organization and application of economic information. You will make an informed assessment of an economic climate outside of the United States to accomplish an entertainment industry objective.
This presentation was provided by Steph Pollock of The American Psychological Association’s Journals Program, and Damita Snow, of The American Society of Civil Engineers (ASCE), for the initial session of NISO's 2024 Training Series "DEIA in the Scholarly Landscape." Session One: 'Setting Expectations: a DEIA Primer,' was held June 6, 2024.
MATATAG CURRICULUM: ASSESSING THE READINESS OF ELEM. PUBLIC SCHOOL TEACHERS I...NelTorrente
In this research, it concludes that while the readiness of teachers in Caloocan City to implement the MATATAG Curriculum is generally positive, targeted efforts in professional development, resource distribution, support networks, and comprehensive preparation can address the existing gaps and ensure successful curriculum implementation.
MATATAG CURRICULUM: ASSESSING THE READINESS OF ELEM. PUBLIC SCHOOL TEACHERS I...
International Monetary Economics, EC6012 Lecture 2 ISLM and Beyond
1. IS-LM & Beyond
EC6012 Lecture 2
Stephen Kinsella
Dept. Economics, University of Limerick
Stephen.Kinsella@ul.ie
February 2, 2009
2. Today
Introduction
The Model
The Output Market
Equilibrium in the product and money markets
Examples
Aggregate supply
The Phillips curve
Dynamics of asset accumulation
Expectations
3. Last Week
1815-1873, Bimetallism. Relative price ratio of gold and silver
varied only between 15:1 and 16:1
1873-1896, Price level falling everywhere. (Cross of Gold)
1914, Everyone off gold to finance war spending
1914-1924, Anchored Gold standard to dollar.
1925/26, Everyone on gold again, massive price deflation into
the 1930’s.
1936-1971, Tripartite Monetary Agreement established a new
int’l monetary system −→ dollar standard, where the dollar
was the only currency anchored to gold.
Since 1973, a flexible exchange rate regime
1985, Plaza Accord. Moves the system into a kind of
managed dollar system relative to European currencies.
Present Day: Euro, Dollar, Yen.
4. Last Week
1815-1873, Bimetallism. Relative price ratio of gold and silver
varied only between 15:1 and 16:1
1873-1896, Price level falling everywhere. (Cross of Gold)
1914, Everyone off gold to finance war spending
1914-1924, Anchored Gold standard to dollar.
1925/26, Everyone on gold again, massive price deflation into
the 1930’s.
1936-1971, Tripartite Monetary Agreement established a new
int’l monetary system −→ dollar standard, where the dollar
was the only currency anchored to gold.
Since 1973, a flexible exchange rate regime
1985, Plaza Accord. Moves the system into a kind of
managed dollar system relative to European currencies.
Present Day: Euro, Dollar, Yen.
5. Last Week
1815-1873, Bimetallism. Relative price ratio of gold and silver
varied only between 15:1 and 16:1
1873-1896, Price level falling everywhere. (Cross of Gold)
1914, Everyone off gold to finance war spending
1914-1924, Anchored Gold standard to dollar.
1925/26, Everyone on gold again, massive price deflation into
the 1930’s.
1936-1971, Tripartite Monetary Agreement established a new
int’l monetary system −→ dollar standard, where the dollar
was the only currency anchored to gold.
Since 1973, a flexible exchange rate regime
1985, Plaza Accord. Moves the system into a kind of
managed dollar system relative to European currencies.
Present Day: Euro, Dollar, Yen.
6. Last Week
1815-1873, Bimetallism. Relative price ratio of gold and silver
varied only between 15:1 and 16:1
1873-1896, Price level falling everywhere. (Cross of Gold)
1914, Everyone off gold to finance war spending
1914-1924, Anchored Gold standard to dollar.
1925/26, Everyone on gold again, massive price deflation into
the 1930’s.
1936-1971, Tripartite Monetary Agreement established a new
int’l monetary system −→ dollar standard, where the dollar
was the only currency anchored to gold.
Since 1973, a flexible exchange rate regime
1985, Plaza Accord. Moves the system into a kind of
managed dollar system relative to European currencies.
Present Day: Euro, Dollar, Yen.
7. Last Week
1815-1873, Bimetallism. Relative price ratio of gold and silver
varied only between 15:1 and 16:1
1873-1896, Price level falling everywhere. (Cross of Gold)
1914, Everyone off gold to finance war spending
1914-1924, Anchored Gold standard to dollar.
1925/26, Everyone on gold again, massive price deflation into
the 1930’s.
1936-1971, Tripartite Monetary Agreement established a new
int’l monetary system −→ dollar standard, where the dollar
was the only currency anchored to gold.
Since 1973, a flexible exchange rate regime
1985, Plaza Accord. Moves the system into a kind of
managed dollar system relative to European currencies.
Present Day: Euro, Dollar, Yen.
8. Last Week
1815-1873, Bimetallism. Relative price ratio of gold and silver
varied only between 15:1 and 16:1
1873-1896, Price level falling everywhere. (Cross of Gold)
1914, Everyone off gold to finance war spending
1914-1924, Anchored Gold standard to dollar.
1925/26, Everyone on gold again, massive price deflation into
the 1930’s.
1936-1971, Tripartite Monetary Agreement established a new
int’l monetary system −→ dollar standard, where the dollar
was the only currency anchored to gold.
Since 1973, a flexible exchange rate regime
1985, Plaza Accord. Moves the system into a kind of
managed dollar system relative to European currencies.
Present Day: Euro, Dollar, Yen.
9. Last Week
1815-1873, Bimetallism. Relative price ratio of gold and silver
varied only between 15:1 and 16:1
1873-1896, Price level falling everywhere. (Cross of Gold)
1914, Everyone off gold to finance war spending
1914-1924, Anchored Gold standard to dollar.
1925/26, Everyone on gold again, massive price deflation into
the 1930’s.
1936-1971, Tripartite Monetary Agreement established a new
int’l monetary system −→ dollar standard, where the dollar
was the only currency anchored to gold.
Since 1973, a flexible exchange rate regime
1985, Plaza Accord. Moves the system into a kind of
managed dollar system relative to European currencies.
Present Day: Euro, Dollar, Yen.
10. Last Week
1815-1873, Bimetallism. Relative price ratio of gold and silver
varied only between 15:1 and 16:1
1873-1896, Price level falling everywhere. (Cross of Gold)
1914, Everyone off gold to finance war spending
1914-1924, Anchored Gold standard to dollar.
1925/26, Everyone on gold again, massive price deflation into
the 1930’s.
1936-1971, Tripartite Monetary Agreement established a new
int’l monetary system −→ dollar standard, where the dollar
was the only currency anchored to gold.
Since 1973, a flexible exchange rate regime
1985, Plaza Accord. Moves the system into a kind of
managed dollar system relative to European currencies.
Present Day: Euro, Dollar, Yen.
11. Last Week
1815-1873, Bimetallism. Relative price ratio of gold and silver
varied only between 15:1 and 16:1
1873-1896, Price level falling everywhere. (Cross of Gold)
1914, Everyone off gold to finance war spending
1914-1924, Anchored Gold standard to dollar.
1925/26, Everyone on gold again, massive price deflation into
the 1930’s.
1936-1971, Tripartite Monetary Agreement established a new
int’l monetary system −→ dollar standard, where the dollar
was the only currency anchored to gold.
Since 1973, a flexible exchange rate regime
1985, Plaza Accord. Moves the system into a kind of
managed dollar system relative to European currencies.
Present Day: Euro, Dollar, Yen.
12. Basic Idea
IS Curve: Describes goods market equilibrium
LM Curve: Shows choice between liquid assets & illiquid
assets.
Money supply is supplied by Central Bank, assumed
exogenous.
CB chooses M/P.
Interest Rate Targeting/MS Targeting?
13. Basic Idea
IS Curve: Describes goods market equilibrium
LM Curve: Shows choice between liquid assets & illiquid
assets.
Money supply is supplied by Central Bank, assumed
exogenous.
CB chooses M/P.
Interest Rate Targeting/MS Targeting?
14. Basic Idea
IS Curve: Describes goods market equilibrium
LM Curve: Shows choice between liquid assets & illiquid
assets.
Money supply is supplied by Central Bank, assumed
exogenous.
CB chooses M/P.
Interest Rate Targeting/MS Targeting?
15. Basic Idea
IS Curve: Describes goods market equilibrium
LM Curve: Shows choice between liquid assets & illiquid
assets.
Money supply is supplied by Central Bank, assumed
exogenous.
CB chooses M/P.
Interest Rate Targeting/MS Targeting?
16. Basic Idea
IS Curve: Describes goods market equilibrium
LM Curve: Shows choice between liquid assets & illiquid
assets.
Money supply is supplied by Central Bank, assumed
exogenous.
CB chooses M/P.
Interest Rate Targeting/MS Targeting?
17. A Macro Model with Four Sectors
The product market,
The money market,
The bond market,
The labour market.
18. Setup
GDP = C + I + G , (1)
GNP = C + I + G + (X − M). (2)
GDP = C + S + T . (3)
19. Setup
GDP = C + I + G , (1)
GNP = C + I + G + (X − M). (2)
GDP = C + S + T . (3)
20. Setup
GDP = C + I + G , (1)
GNP = C + I + G + (X − M). (2)
GDP = C + S + T . (3)
21. The Output Market
Y =C +I +G (4)
(Caution)
C = C (Y ). (5)
Y = C (Y ) + ¯ + G .
I¯ (6)
22. The Output Market
Y =C +I +G (4)
(Caution)
C = C (Y ). (5)
Y = C (Y ) + ¯ + G .
I¯ (6)
23. The Output Market
Y =C +I +G (4)
(Caution)
C = C (Y ). (5)
Y = C (Y ) + ¯ + G .
I¯ (6)
24. The Output Market
Y =C +I +G (4)
(Caution)
C = C (Y ). (5)
Y = C (Y ) + ¯ + G .
I¯ (6)
25. Derivation
C = C (YD). (7)
C = C (YD, A, r ). (8)
26. Derivation
C = C (YD). (7)
C = C (YD, A, r ). (8)
31. Shifts in IS Curve
1. an increase the expected rate of inflation, or
2. a fall in the price of output, or
3. a rise in the stock of assets, or
4. an increase in the price of capital, or
5. a reduction in the level of taxes.
32. Money Markets
MD M + B + Pk K
= L Y , −π, r − π, rk , (12)
P P
BD M + B + Pk K
= J Y , −π, r − π, rk , (13)
P P
Pk K M + B + Pk K
= N Y , −π, r − π, rk , (14)
P P
M D + B D + Pk K D M + B + Pk K
= =A (15)
P P
Y
P ×R K
rk = (16)
Pk
33. Money Markets
MD M + B + Pk K
= L Y , −π, r − π, rk , (12)
P P
BD M + B + Pk K
= J Y , −π, r − π, rk , (13)
P P
Pk K M + B + Pk K
= N Y , −π, r − π, rk , (14)
P P
M D + B D + Pk K D M + B + Pk K
= =A (15)
P P
Y
P ×R K
rk = (16)
Pk
34. Money Markets
MD M + B + Pk K
= L Y , −π, r − π, rk , (12)
P P
BD M + B + Pk K
= J Y , −π, r − π, rk , (13)
P P
Pk K M + B + Pk K
= N Y , −π, r − π, rk , (14)
P P
M D + B D + Pk K D M + B + Pk K
= =A (15)
P P
Y
P ×R K
rk = (16)
Pk
35. Money Markets
MD M + B + Pk K
= L Y , −π, r − π, rk , (12)
P P
BD M + B + Pk K
= J Y , −π, r − π, rk , (13)
P P
Pk K M + B + Pk K
= N Y , −π, r − π, rk , (14)
P P
M D + B D + Pk K D M + B + Pk K
= =A (15)
P P
Y
P ×R K
rk = (16)
Pk
36. Money Markets
MD M + B + Pk K
= L Y , −π, r − π, rk , (12)
P P
BD M + B + Pk K
= J Y , −π, r − π, rk , (13)
P P
Pk K M + B + Pk K
= N Y , −π, r − π, rk , (14)
P P
M D + B D + Pk K D M + B + Pk K
= =A (15)
P P
Y
P ×R K
rk = (16)
Pk
37. Put this all together
M M +B RK
= L Y , −π, r − π, rk , + (17)
P P rk
B M +B RK
J Y , −π, r − π, rk , + (18)
P P rk
38. Put this all together
M M +B RK
= L Y , −π, r − π, rk , + (17)
P P rk
B M +B RK
J Y , −π, r − π, rk , + (18)
P P rk
39. Put this all together
M M +B RK
= L Y , −π, r − π, rk , + (17)
P P rk
B M +B RK
J Y , −π, r − π, rk , + (18)
P P rk
46. [Bush’s fiscal stimulus]
Exercise
Consider a standard IS-LM model in equilibrium. Graphically
analyse the effects of a large increase in government expenditure
financed through taxation on output/income and the interest rate,
and briefly explain your reasoning.
47. [The credit crunch]
Exercise
Consider a standard IS-LM model in equilibrium. Graphically
analyse the effects of a large decrease in the supply of money on
output/income and the interest rate, and briefly explain your
reasoning.
48. [Numerical example]
Exercise
Imagine a closed economy with equilibrium output given by
Y = C + I + G . Total supply is given by Y = 5, 000.
Consumption is determined by C = 250 + 0.75(Y − T ).
Investment is given by I = 1000 − 50r . Initially, fix G and T at
G = 1, 000,T = 1, 000. Suppose the government pursues an
expansionary policy, driving G from 1000 to 1250. What happens
to national savings? Is there a deficit? How much of one? Will the
interest rate decrease or increase? By how much?
49. Aggregate Supply
This aggregate production function relates the labour input L and
the level of the capital stock employed to the level of output in the
economy.
Y = F (K , L). (22)
53. [Lifetime earnings and the budget constraint]
Exercise
Jill earns 200 in period 1, and 50 in period two. Jill wants to
consume the same amount throughout her life. Without access to
a credit market, Jill’s consumption stream is {200, 50}. With a
credit market, Jill can consume 200+50/2 = 125 per period, so
her consumption stream at {c1 , c2 }, which is {125, 125}. In reality,
Jill would buy a bond or a treasury bill to achieve consumption
patterns like this. What would her consumption set look like?
54. The Phillips Curve
The Phillips curve relates changes in inflation to changes in
unemployment.
˙
P
p = = α(Y − ¯ )) + π
˙ (Y (30)
P