第四章-Policy-package

Dr.JingboHUANGDepartmentofInternationalBusiness●Lingnan(University)College●SunYat-senUniversityChapter4PolicyPackagePolicyPackageDr.JingboHUANGDepartmentofInternationalBusiness●Lingnan(University)College●SunYat-senUniversityTOPIC4PolicyPackageCase:•UgandaandtheWashingtonConsensusDr.JingboHUANGDepartmentofInternationalBusiness●Lingnan(University)College●SunYat-senUniversityMacroeconomicObjectivesThemajormacroeconomicissues¾economicgrowth¾unemployment¾inflation¾balanceofpaymentsandexchangerates-balanceofpaymentsdeficitsandsurpluses-exchangeratemovementsDr.JingboHUANGDepartmentofInternationalBusiness●Lingnan(University)College●SunYat-senUniversityEconomicGrowth™Causesofactualgrowth¾aggregatedemand¾aggregatedemandrelativetopotentialoutput™Causesofpotentialgrowth¾increasesinthequantityoffactors-capital-labor-landandrawmaterials-theproblemofdiminishingreturns¾increasesinfactorproductivityDr.JingboHUANGDepartmentofInternationalBusiness●Lingnan(University)College●SunYat-senUniversityPoliciestoAchieveGrowth™demand-sideandsupply-sidepolicies™market-orientatedandinterventionistpoliciesDr.JingboHUANGDepartmentofInternationalBusiness●Lingnan(University)College●SunYat-senUniversityAggregateDemandIncomeAggregatedemandCAggregatedemandiswhathouseholdsplantospendonconsumptionandwhatfirmsplantospendoninvestment.AD=C+IITheADfunctionistheverticaladditionofCandI.(FornowIisassumedautonomous.)Dr.JingboHUANGDepartmentofInternationalBusiness●Lingnan(University)College●SunYat-senUniversityEffectsofaFallinAggregateDemandOutput,IncomeDesiredspending45olineAD0Y0•SupposetheeconomystartsinequilibriumatY0.•afallinaggregatedemandtoAD1AD1•LeadstheeconomytoanewequilibriumatY1.Y1NotethatthechangeinequilibriumoutputislargerthantheoriginalchangeinAD.Dr.JingboHUANGDepartmentofInternationalBusiness●Lingnan(University)College●SunYat-senUniversityOPricelevelNationaloutputASADPeP2abAggregateDemandandAggregateSupplyDr.JingboHUANGDepartmentofInternationalBusiness●Lingnan(University)College●SunYat-senUniversityUnemployment™disequilibriumunemployment¾real-wage(classical)unemployment¾demand-deficient(cyclical)unemployment¾unemploymentarisingfromagrowthinthelaborsupply™Equilibriumunemployment¾frictional(search)unemployment¾structuralunemployment-changingpatternofdemand-technologicalunemployment-regionalunemployment¾seasonalunemploymentDr.JingboHUANGDepartmentofInternationalBusiness●Lingnan(University)College●SunYat-senUniversityInflation™Typesofinflation¾demandpull¾costpush-wagepush-profitpush-import-pricepush¾structural(demandshift)¾expectationsandinflation™Policiestotackleinflation¾demand-sidepolicies¾supply-sidepoliciesDr.JingboHUANGDepartmentofInternationalBusiness●Lingnan(University)College●SunYat-senUniversityPricelevelASAD1P1AD2P2Demand-PullInflationNationaloutputOQ1Q2Dr.JingboHUANGDepartmentofInternationalBusiness●Lingnan(University)College●SunYat-senUniversityPricelevelAS1ADP1AS2P2Cost-PushInflationNationaloutputQ1Q2ODr.JingboHUANGDepartmentofInternationalBusiness●Lingnan(University)College●SunYat-senUniversityExports,ImportsandtheTradeBalance•Athigherincomelevels,thereisatradedeficit.•Atrelativelylowincome,exportsexceedimports–thereisatradesurplus.IncomeX,M•butthatimportsincreasewithincomeImports•Assumethatexportsareindependentofincome,Exports•ThereistradebalanceatincomeY*,butthereisnoguaranteethatthiscorrespondstofullemployment.Y*Dr.JingboHUANGDepartmentofInternationalBusiness●Lingnan(University)College●SunYat-senUniversityNationalIncomeAccountingIdentity™GDPisthevalueofallfinalgoodsandservicesproducedinthecountrywithinagivenperiod.™Ontheproductionside,outputispaidoutasfactorpaymentstolaborandcapital.™Onthedemandside,outputisconsumedorinvestedbytheprivatesector,usedbythegovernment,orexported.Dr.JingboHUANGDepartmentofInternationalBusiness●Lingnan(University)College●SunYat-senUniversityThecircularflowofincomeBANKS,etcGOV.ABROADWITHDRAWALSINJECTIONSFirmsHouseholdsConsumptionofdomesticallyproducedgoodsandservices(Cd)FactorpaymentsNetsaving(S)Nettaxes(TA-TR)Importexpenditure(M)Governmentexpenditure(G)Exportexpenditure(X)Investment(I)Dr.JingboHUANGDepartmentofInternationalBusiness●Lingnan(University)College●SunYat-senUniversityNationalIncomeAccountingAgain™ExpenditurecomponentsGDP=C+I+G+(X-M)™IncomecomponentsY+TR=C+S+TAwhereTA:governmenttransferpayment;TA:taxes;Y=GDP;ThenGDP=C+S+(TA-TR)C+I+G+(X-M)=C+S+(TA-TR)GrossDomesticGrossPrivateGrossGovt.SavingsBorrowingfmAbroadInvestmentSavings(Fiscalsurplus)(Netimports)I=S+(TA-G-TR)+(M-X)Dr.JingboHUANGDepartmentofInternationalBusiness●Lingnan(University)College●SunYat-senUniversityNationalIncomeAccountingAgain(G+TR-TA)=(S-I)+(M-X)Budgetdeficit=privatesaving-investment+netimports™Anincreaseinthebudgetdeficitmustbebalancedbyeither:—increasedprivatesavings—reducedinvestment—increasedborrowingfromabroad(currentaccountdeficit)(M-X)=(G+TR-TA)+(I-S)Currentaccountdeficit=Budgetdeficit+invest.-privatesaving™Anincreaseinthecurrentaccountdeficitmustbebalancedbyeither:—increasedbudgetdeficit(reducedpublicsavings)—increase