普格爾_國(guó)際經(jīng)濟(jì)學(xué)課件chapter25 national-and-global-choices

1、CHAPTER 25National and Global Choices:Floating Rates and the Alternatives一、Key issues in the choice ofexchange rate policyEffects of Macroeconomic shocks Internal shocks generally cause less trouble with a fixed rate than with a float. Domestic monetary shock Domestic spending shock External shocks:

2、 opposite conclusions about stability and disruption. International trade shocks International capital-flow shocksThe effectiveness of government policies Monetary policy gains effectiveness under floating exchange rates The effectiveness of fiscal policy depends on how responsive international capi

3、tal flows are to interest rates.Figure 11.1Issues With Fixed/Floating RatesFigure 11.1Issues With Fixed/Floating Rates (continued)Advantage of FloatingExchange RatesAdvantage of FixedExchange RatesFigure 11.1Issues With Fixed/Floating Rates (continued)Advantage of FloatingExchange RatesAdvantage of

4、FixedExchange RatesNational choicesIn favor of a country adopting a floating exchange rate Provides more effective use of two important tools for adjusting toward internal and external balances. Permits a country to pursue goals, priorities, and policies that meet its own domestic preferences and ne

5、eds, with less concern about how these will put pressure on the exchange rate. The country doesnt need to defend a fixed rate against speculative attacks.Against a country adopting a floating exchange rate Variability increases exchange rate risk Overshooting offloating exchange ratesWhile the globa

6、l trend is toward floating, a number of countries continue to maintain fixed exchange rates.Extreme Forms of FixedExchange RatesCurrency BoardThe country has its own currency.The only job of themonetary authority is to defend the fixed exchange rate.DollarizationThe country uses the currency of some other country as its own.Monetary UnionSeveral countries agree that exchange rates between their currencies are permanently fixed, and a single monetary authority conducts a single, union-wide monetary policy.European Monetary Union(see the chapter 6)Figure 11.3 Dollar Value of the Eur