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  • Lecture 8: The Goods Market and The Exchange Rate

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    manojverma231988
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    The document summarizes key concepts relating to goods markets, exchange rates, and the effects of devaluations. It includes: 1) An overview of goods market equations including consumption, investment, government spending, exports and imports. 2) A discussion of the J-curve effect where exports may initially increase following a currency depreciation in the short run. 3) An examination of exchange rate determination using both goods and financial market models, where the exchange rate is influenced by interest rates and expectations of future exchange rates.

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    Lecture 8

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    The document summarizes key concepts relating to goods markets, exchange rates, and the effects of devaluations. It includes: 1) An overview of goods market equations including consumption, investment, government spending, exports and imports. 2) A discussion of the J-curve effect where exports may initially increase following a currency depreciation in the short run. 3) An examination of exchange rate determination using both goods and financial market models, where the exchange rate is influenced by interest rates and expectations of future exchange rates.

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    Sinalizar o conteúdo como inadequado
    14 visualizações6 páginas

    Lecture 8: The Goods Market and The Exchange Rate

    Enviado por

    manojverma231988
    The document summarizes key concepts relating to goods markets, exchange rates, and the effects of devaluations. It includes: 1) An overview of goods market equations including consumption, investment, government spending, exports and imports. 2) A discussion of the J-curve effect where exports may initially increase following a currency depreciation in the short run. 3) An examination of exchange rate determination using both goods and financial market models, where the exchange rate is influenced by interest rates and expectations of future exchange rates.

    Direitos autorais:

    Attribution Non-Commercial (BY-NC)
    Baixe no formato PDF, TXT ou leia online no Scribd
    Sinalizar o conteúdo como inadequado
    de 6

    Lecture 8: The Goods Market

    and the Exchange Rate

    Devaluations (static and dynamic responses) Exchange rate determination (capital markets)

    The Goods Market

    Z = C + I + G + X - eQ C(Y-T) + I(Y,I) + G Q = Q(Y,e) +X = X(Y*,e) + +

    Figures

    Figs 19.1 and 19-2


    Increase in domestic and foreign demand
    games countries play depreciation

    The J-Curve

    eQ(Y,e) : increase or decrease with e?


    In the very short run: it may increase!
    And if strong enough: X(Y*,e) - eQ(Y,e) may do the same. Dynamics of NX in response to a depreciation; fig 19-6

    The Exchange Rate

    The Goods Market Y = C(Y-T) + I(Y,i) + G + NX(Y,Y*, E P*/P) constant Financial Markets M/P = YL(i) e i(t) = i*(t) + E(t+1) - E(t) E(t)

    Cont. The Exchange Rate

    i i*

    e E

    e i = i* + E - E E given E e and i*

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