« September 2006 | Main | November 2006 »
October 31, 2006
The Solow Growth Model
Somebody forgot his camera.
Posted by bparke at 10:57 PM | Comments (0)
October 26, 2006
Midterm 2
Posted by bparke at 10:58 PM | Comments (0)
October 24, 2006
Midterm 1 Answers
Posted by bparke at 02:12 AM | Comments (0)
Midterm 2 Preparation
We previewed the questions for the second midterm.
Step one is to know the basic model.
Then, organize your cases.
We concluded with four cases:
Posted by bparke at 02:00 AM | Comments (0)
October 17, 2006
Fixed Exchange Rates
The government devotes monetary policy to holding the exchange rate fixed.
We start with the basic model.
An increase in foreign income causes an expansion. An increase in p then returns the equilibrium to the initial point.
McCallum describes the automatic changes in the money supply caused by imposition of a fixed exchange rate. An alternative view is that the government could engage directly in domestic open market operations.
With a fixed exchange rate, fiscal policy is effective in increasing y if it is below full output and monetary policy is not.
The other two options are to do nothing (letting price adjustments increase y) and to devalue.
A common scenario is an IS curve drifting to the left (because of investment declines, for example). The central bank spends foreign exchange reserves to defend the exchange rate, but at some point resorts to devaluation to get back to full output. We really cannot ignore the expectations terms in thinking about this case. The effects of abrupt, large changes in the exchange rate are also an important issue.
With a fixed exchange rate enforced by a common currency, there simply is no LM curve.
Posted by bparke at 03:27 AM | Comments (0)
Compare to Flexible Rates
In discussing fixed rates, we recalled that under flexible rates monetary policy is effective in changing y, but fiscal policy is not.
Posted by bparke at 02:50 AM | Comments (0)
October 13, 2006
Basic Model: Short-Term Analysis
Posted by bparke at 01:48 AM | Comments (0)
October 12, 2006
An Explanation of the Force Keeping the Economy at R*
Posted by bparke at 02:08 AM | Comments (0)
Basic Model: The Stationary State
In the stationary state all the variables have converged to constant values.
The basic model:
The basic model after imposing stationarity restrictions:
Posted by bparke at 01:47 AM | Comments (0)
October 05, 2006
A Basic Model
We put together the "Basic Model" in McCallum's International Monetary Economics.
Posted by bparke at 02:26 AM | Comments (0)
Balance of Payments
We studied the concept of the balance of payments by looking at the data from the latest Economic Report of the President.
We checked the numbers for 2004.
Posted by bparke at 02:24 AM | Comments (0)
October 03, 2006
Purchasing Power Parity
Purchasing power parity links the exchange rate between two countries' currencies to the two price levels. Despite the appeal of this story, there is scant empirical support, especially in the short run.
Posted by bparke at 02:24 AM | Comments (0)
Logarithms
We had an "interesting" discussion of logarithms.
Posted by bparke at 02:23 AM | Comments (0)