ch11Market-Clearing Models of the Business Cycle(中

Chapter11Market-ClearingModelsoftheBusinessCycleIntroduction•Inthischapter,wewillstudythreemodelsofbusinesscycles:–theFriedman-Lucasmoneysurprisemodel–therealbusinesscyclemodel–theKeynesiancoordinationfailuremodel•Allthreeoftheminvolvesexplicitequilibriummodelswithoptimizingconsumersandfirms.•Eachmodeldiffersintermsofwhatisimportantincausingbusinesscyclesandtheroleimpliedforgovernmentpolicy.•Wewillstudyhowwelleachmatchesthebusinesscyclefactsanddiscusseachmodel’sshortcomings.TheFriedman-LucasMoneySurpriseModel•Thekeyelementisthatworkershaveimperfectinformation,intheshortrun,aboutaggregatevariablesthatareimportanttotheirdecisionmaking.•Intheory,aworkerhascompleteinformationaboutthecurrentnominalwageW,butnotonthepricelevelP,sohe/shealsodoesnotobserverealwagew.•Supposetherearetwoshocksthathittheeconomy:–atemporarychangeintheTFP,z–apermanentincreaseinthemoneysupply,M•Assumethattheworkercannotobserveeitheroneofthem.•Thoughtheworkercannotobservethepriceleveldirectly,he/shecanmakeinferencesaboutthechancesofaparticularshockhavinghittheeconomy,basedonhowthenominalwagemovesinthecurrentperiod.•Recallfromchapter9that–ApermanentincreaseinMwouldcauseaproportionateincreaseinPandtherewouldbenoeffectsoncurrentrealwage.–AtemporaryincreaseinzwouldleadtoanincreaseinrealwageandafallinP.•Whathappenwhentheworkermakesincorrectinference?Asaresult,moneycanbenon-neutral.•SupposetheeconomyisinequilibriuminitiallywithY1,N1,r1andP1.•SupposeM,buttheworkerperceivesthatzmayhaveincreasedtemporarilywhenhe/sheseesW.•Theworkerthenperceivesthatwtobehigherandincreaselabor.laborsupplymovesfromN1s(r1)toN2s(r1).outputsupplycurveshiftstotherightY*andr*PL(Y,r)shiftstotherightPInthelabormarket,r*N2s(r1)movesleftwardtoN1s(r2).N*andw*•Moneyisnotneutral.SinceanincreaseinMwouldcauseY*,r*,N*andw*.•Marketpricescarryimportantsignalswhichaidsintheappropriateallocationofresources.•Here,anyvariabilityinMdistortsthepricesignalsandmisleadsworkerstomakewrongdecisions.•Somonetarypolicyshouldbeaspredictableaspossible,suchastheconstantmoneygrowthrule.CritiqueoftheMoneySurpriseModel•Predictionsofthemoneysurprisemodel:•Informationonaggregatepriceindicesandthemoneysupplyiswidelyavailableonatimelybasis,soitseemshardforpeopletobefooledashappensinthemodel.RealBusinessCycleModel•Motivation:thedetrendedSolowresidual(ameasureofz)closelytracksdetrendedrealGDP.Thismeansproductivityshocksappeartobeapotentialexplanationforbusinesscycles.•Factorsthatincreasezinclude:–goodweather,–technologicalinnovations,–theeasingofgovernmentregulations,–decreaseintherelativepriceofenergy.SupposethereisapersistentincreaseinTFP,sothatbothzandz’.zmarginalproductoflaborNdandYsshiftstotherightz’futureMPKandfutureincomedemandforinvestmentandconsumptionYdshiftstotherightY*andr*(?)Supposer*PL(Y,r)shiftstotherightP*Inthelabormarket,r*Ns(r)shiftstotheleft.•AsinChapter7,assumethatthelaborsupplycurveshiftslessthanthelabordemandcurve,sincetheintertemporalsubstitutioneffectonlaborsupplyfromthechangeintherealinterestrateisrelativelysmall.•Hence,N*andw*.PredictionsoftheRBCModel•Onefeaturethatthemodelcannotreplicateistheprocyclicalmoneysupply.RealBusinessCyclesandMoneySupply•IntheRBCmodel,moneyisneutral.•Theproblemis,howcanthistypeofmodelexplainthefollowingtwokeybusinesscycleregularities:–Thenominalmoneysupplyisprocyclical.–ThenominalmoneysupplytendstoleadrealGDP.•Bothregularitiesofthenominalmoneysupplycanbeexplainedifthemoneysupplyisnotdeterminedexogenously,butrespondstoconditionsintheeconomy,i.e.,endogenousmoney.ImplicationsofEndogenousMoney•Supposebusinesscyclesarecausedbyfluctuationsinz.Therearetwochannelsviawhichwecanobtaintheaboveregularitiesofthemoneysupply.1.Procyclicalityi)IfweuseM1,M2asourmoneysupplymeasure,thenbankdepositsarealsoincluded.zYbankactivitiesbankdepositsMHence,moneysupplyisprocyclical.ii)Supposethemaintargetofthecentralbankistostabilizeprices.Supposezandz’(i.e.apersistentincreaseinTFP),Y*andr*PL(Y,r)shiftstotherightP*•Inordertostabilizeprices,themonetaryauthorityhavetoincreasemoneysupply.•Hence,moneysupplyisprocyclical.2)NominalmoneysupplytendstoleadrealGDP(statisticalcausality)i)Thebankingsectortendstoleadothersectorsoftheeconomy,asbanksprovideloansforrealactivitythatwilloccurlater.BankloansbankdepositsMHence,monetaryaggregateswilltendtoleadrealGDP.ii)Ifthemonetaryauthorityistryingtostabilizeprices,anditforeseesthatzwillleadtoY,thenitwillincreasemoneysupplybeforetheoutputincreaseisobserved.ImplicationsforGovernmentPolicy•InthebasicRBCmodel,wherethereisnodistortingtaxesandnoexternalities,thereisnoroleforgovernmentstabilizationpolicy.–Levelchangesinthemoneysupplyisneutral,somonetarypolicyisineffectiveinsmoothingoutbusinesscycles.–Sinceallmarketsclear,therearenoinefficienciesthatgovernmentpolicyshouldcorrectfor.•InthebasicRBCmodel,businesscyclesareessentiallyoptimalresponsesoftheeconomytofluctuationsinTFP,andnothingshouldbedoneaboutthem.KeynesianCoordinationFailureModel•Thebasicideaisthatitisdifficultforprivatesectorworkersandpro