Chapter 7 Macroeconomic Policies汇总.docx

Chapter 7 Macroeconomic Policies汇总.docx

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Chapter7MacroeconomicPolicies汇总

Chapter7MacroeconomicPolicies

Inafloatingexchangedoesthecurrentaccountdeficitmatter?

ThreeBroadPolicies

•DemandSide

•ExpenditureSwitching

•Tariffs

•Quotas

•Exchangecontrols

•Exportsubsidies

•Expendituredampening

•Fiscal

•Monetary

•SupplySide

SupplySidePolicies

•Definition

•‘Anyactiontakenbythegovernmentthatenablesfirmstolowertheircosts,thusboostingefficiencyandcompetitivenessofthefirms.Successfulpoliciesshiftlongrunaggregatesupplyoutwardsraisingpotentialoutputs.’

•Wouldleadtomakinganeconomiesgoodsandservicesmorecompetitiveinbothdomesticandinternationalmarkets

•SupplySidePolicies

1.Increasinglaborforceflexibility

2.Investineducation/training

3.Investininfrastructure

4.Subsidies/grants/softloans

•Increasinglabourforceflexibilty

•Loweringnationalminimumwage

•Weakeningtradeunionpower

•Reducingunemploymentbenefits

•Changelawsregardingredundancy/hiringandfiringlaws

•Evaluation–Protectindividualsfromexploitation,createsin-equityinlabourmarket（conflictwithobjective）

•Investineducationandtraining

•Improvequalityoffutureworkforce

•Raisepayforteachers

•Reduceclasssizes

•Improveteachertraining

•Evaluation.Longterm,expensive,opportunitycostforgovernment,governmentwantpaybackduringtheirelectoralterm

•Investininfrastructure

•Buildroads,rail,airports,portsetc.

•Reducebusinesscosts

♦Quickertransportationlesfuelandstaffcosts

♦Reducerateofdepreciation

♦Environmentalbenefits

•Evaluation.NIMBY（Notinmybackyard）,expensive,environment

•Subsidiesetc.

•Reducecostsofproduction

•Givesinfantindustryachancetodevelop

•Protectdomesticindustry

•Evaluation

♦Expensiveinshortrun（butmaygetlongtermpaybackfromfuturetaxesetc.）

♦Makesfirmslesscompetitive

♦Whyshouldgovernmentgivemoneyifbankswont?

•OtherSupplysideideas

•Lessred-tape（Lessbureaucracy）

•Relaxedhealthandsafetylaws

•Relaxingimmigrationlaws

•CorporatetaxationlevelsTaxreformtoencourageincentives

andentrepreneurialspirit

•Incentivestodevelopnewtechnology–investment

•Drivetoembracing‘knowledgedriveneconomy’

•Regionalpoliciestoencourageenterprise,investment,location,expansion

•Whatarethetrade-offs?

•SupplySidePolicyDiagram

•EvaluationofSSP

•Verylongterm

•ConflictwithPoliticalobjectives

•Expensive/Highertaxes-Whoshouldpay?

•Donotcaterforeconomicshocks（demand/supply）

•NIMBYsyndrome

•Non-equitable–Richpayforthepoor!

•Environmentalissues

•Cultural/SocialIssues

•Definitions

•Velocityofmoney

•Thevelocityofmoney（alsocalledvelocityofcirculation）istheaveragefrequencywithwhichaunitofmoneyisspentonnewgoodsandservicesproduceddomesticallyinaspecificperiodoftime.Velocityhastodowiththeamountofeconomicactivityassociatedwithagivenmoneysupply.Whentheperiodisunderstood,thevelocitymaybepresentedasapurenumber;otherwiseitshouldbegivenasapurenumberovertime.

•WageDrift

•Theamountbywhichthewageorsalaryofaworkerorgroupofworkersexceedsapreviouslynegotiatedagreement.Wagedriftmayoccur,forexample,ifanemployeeisaskedtoworkunexpectedovertimeorifpersonsinaregionareofferedwageshigherthanthenationalrateduringalaborshortage.

ExpenditureSwitchingpolicies

•Definition

•‘Fiscalormonetarypoliciesthataredesignedtoreducedomesticexpenditureonimportstowardsandtransferdemanddomesticgoodsandservices.

•Thusreducingbalanceoftradedeficits

•AsoutlinesinChapter4

•Quota's

•Tariffs

•Exchangecontrols

•Exportsubsidies

•Embargoes

•Voluntaryexportrestraints

Benefits（pros）

•Protectdomesticindustryandjobs

•Protectsunriseandsunsetindustries

•BOPdeficitreduction

•Quickandeffective

•Upwardpressureondomesticexchangerate（floating）

Problems（Cons）

•Interferewithmarketforces

•Limitbenefitsoffreetradeandspecialization

•LimitedbyWTO

•IneffectiveifimportshaveinelasticPED

•Welfareloss

•Increasedrealcostsforconsumers（inflationary）

ExpenditureDampening

•Definition

•Fiscalormonetarypoliciesthataredesignedtorestrictaggregatedemand（includingdemandsforimports）

•KeynesianVsMonetarist

Fiscalpolicy

•Fiscalpolicylooksathowgovernmentspendtheirmoneyandhowtheycontroltheirtaxes.

•Thereare2typesoffiscalpolicy:

•Deflationary/Contractionaryfiscalpolicy:

Wherethegovernmentreducespendingand/orwhentheymaketaxeshigher,theytrytoincreaseitsPSBR（publicsectorborrowingrequirement）tofundthetaxdropstheyalsodothistoreduceitssurplusonitsbudgetforthefiscalyear.AimedatreducingADtocontrolinflationandreducingspendingonimportstoimproveBOPdefecits–

•Willthisrestrictimports?

•