克鲁格曼国际经济学第六版的教师手册含英文习题答案imch15.docx

克鲁格曼国际经济学第六版的教师手册含英文习题答案imch15.docx

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克鲁格曼国际经济学第六版的教师手册含英文习题答案imch15

CHAPTER15

PriceLevelsandtheExchangeRateintheLongRun

ChapterOrganization

TheLawofOnePrice

PurchasingPowerParity

TheRelationshipBetweenPPPandtheLawofOnePrice

AbsolutePPPandRelativePPP

ALong-RunExchange-RateModelBasedonPPP

TheFundamentalEquationoftheMonetaryApproach

OngoingInflation,InterestParity,andPPP

TheFisherEffect

EmpiricalEvidenceonPPPandtheLawofOnePrice

Box:

SomeMeatyEvidenceontheLawofOnePrice

ExplainingtheProblemswithPPP

TradeBarriersandNontradables

DeparturesfromFreeCompetition

Box:

HongKong’sSurprisinglyHighInflation

InternationalDifferencesinPriceLevelMeasurement

PPPintheShortRunandintheLongRun

Box:

StickyPricesandtheLawofOnePrice:

EvidenceFromScandinavianDuty-freeShops

CaseStudy:

WhyPriceLevelsareLowerinPoorerCountries

BeyondPurchasingPowerParity:

AGeneralModelofLong-RunExchangeRates

TheRealExchangeRate

Demand,Supply,andtheLong-RunRealExchangeRate

NominalandRealExchangeRatesinLong-RunEquilibrium

CaseStudy:

WhyHastheYenKeepRising?

InternationalInterestRateDifferencesandtheRealExchangeRate

RealInterestParity

Summary

Appendix:

TheFisherEffect,theInterestRate,andtheExchangeRateundertheFlexible-PriceMonetaryApproach

ChapterOverview

Thetimeframeoftheanalysisofexchangeratedeterminationshiftstothelongruninthischapter.Ananalysisofthedeterminationofthelong-runexchangerateisrequiredforthecompletionoftheshort-runexchangeratemodelsince,asdemonstratedintheprevioustwochapters,thelong-runexpectedexchangerateaffectsthecurrentspotrate.Issuesaddressedhereincludebothmonetaryandreal-sidedeterminantsofthelong-runrealexchangerate.Thedevelopmentofthemodelofthelong-runexchangeratetouchesonanumberofissues,includingtheeffectofongoinginflationontheexchangerate,theFishereffect,andtheroleoftradablesandnontradables.Empiricalissues,suchasthebreakdownofpurchasingpowerparityinthe1970sandthecorrelationbetweenpricelevelsandpercapitaincome,areaddressedwithinthisframework.

Thelawofoneprice,whichholdsthatthepricesofgoodsarethesameinallcountriesintheabsenceoftransportcostsortraderestrictions,presentsanintuitivelyappealingintroductiontolong-runexchangeratedetermination.Anextensionofthislawtosetsofgoodsmotivatesthepropositionofabsolutepurchasingpowerparity.Relativepurchasingpowerparity,alessrestrictiveproposition,relateschangesinexchangeratestochangesinrelativepricelevelsandmaybevalidevenwhenabsolutePPPisnot.Purchasingpowerparityprovidesacornerstoneofthemonetaryapproachtotheexchangerate,whichservesasthefirstmodelofthelong-runexchangeratedevelopedinthischapter.Thisfirstmodelalsodemonstrateshowongoinginflationaffectsthelong-runexchangerate.

ThemonetaryapproachtotheexchangerateusesPPPtomodeltheexchangerateasthepricelevelinthehomecountryrelativetothepricelevelintheforeigncountry.Themoneymarketequilibriumrelationshipisusedtosubstitutemoneysupplydividedbymoneydemandforthepricelevel.TheFisherrelationshipallowsustosubstituteexpectedinflationforthenominalinterestrate.Theresultingrelationshipmodelsthelong-runexchangerateasafunctionofrelativemoneysupplies,theinflationdifferentialandrelativeoutputinthetwocountries;

E=（M/M*）·l（pe-p*e,（Y*/Y））

Thelfunctionrepresentstheratioofforeigntodomesticmoneydemand;thus,boththedifferenceinexpectedinflationratesandtheoutputratioenterthefunctionwithapositivesign.Anincreaseininflationathomemeanshigherhomeinterestrates（throughtheFisherequation）andlowerhomemoneydemand.Anincreaseinforeignoutputraisesforeignmoneydemand.

Oneresultfromthismodelthatstudentsmayfindinitiallyconfusingconcernstherelationshipbetweenthelong-runexchangerateandthenominalinterestrate.Themodelinthischapterprovidesanexampleofanincreaseintheinterestrateassociatedwithexchangeratedepreciation.Incontrast,theshort-runanalysisinthepreviouschapterprovidesanexampleofanincreaseinthedomesticinterestrateassociatedwithanappreciationofthecurrency.Thesedifferentrelationshipsbetweentheexchangerateandtheinterestratereflectdifferentcausesfortheriseintheinterestrateaswellasdifferentassumptionsconcerningpricerigidity.Intheanalysisofthepreviouschapter,theinterestraterisesduetoacontractioninthelevelofthenominalmoneysupply.Withfixedprices,thiscontractionofnominalbalancesismatchedbyacontractioninrealbalances.Excessmoneydemandisresolvedthroughariseininterestrateswhichisassociatedwithanappreciationofthecurrencytosatisfyinterestparity.Inthischapter,thediscussionoftheFishereffectdemonstratesthattheinterestratewillriseinresponsetoananticipatedincreaseinexpectedinflationduetoananticipatedincreaseintherateofgrowthofthemoneysupply.Thereisincipientexcessmoneysupplywiththisriseintheinterestrate.Withperfectlyflexibleprices,themoneymarketclearsthroughanerosionofrealbalancesduetoanincreaseinthepricelevel.Thispricelevelincreaseimplies,throughPPP,adepreciationoftheexchangerate.Thus,withperfectlyflexibleprices（anditscorollaryPPP）,anincreaseintheinterestrateduetoanincreaseinexpectedinflationisassociatedwithadepreciationofthecurrency.

EmpiricalevidencepresentedinthechaptersuggeststhatbothabsoluteandrelativePPPperformpoorlyfortheperiodsince1971.Eventhelawofonepricefailstoholdacrossdisaggregatedcommoditygroups.Therejectionofthesetheoriesisrelatedtotradeimpediments（whichhelpgiverisetonontradedgoodsandservices）,toshiftsinrelativeoutputpricesandtoimperfectlycompetitivemarkets.SincePPPservesasacornerstoneforthemonetaryapproach,itsrejectionsuggeststhataconvincingexplanationofthelong-runbehaviorofexchangeratesmustgobeyondthedoctrineofpurchasingpowerparity.TheFishereffectisdiscussedinmoredetailandaccompaniedbyadiagrammaticexpositioninanappendixtothechapter.

Amoregeneralmodelofthelong-runbehaviorofexchangeratesinwhichreal-sideeffectsareassignedaroleconcludesthechapter.Thematerialinthissectiondropstheassumptionofaconstantrealexchangerate,anassumptionthatyoumaywanttodemonstratetostudentsisnecessarilyassociatedwiththeassumptionofPPP.Motivatingthismoregeneralapproachiseasilydonebypresentingstudentswithatimeseriesgraphoftherecentbehavioroftherealexchangerateofthedollarwhichwilldemonstratelargeswingsinitsvalue.Therealexchangerate,q,istheratiooftheforeignpriceindex,expressedindomesticcurrency,tothedomesticpriceindex,or,equivalently,E=q·（P/P*）.Thechapterincludesaninformaldiscussionofthemannerinwhichthelongrunrealexchangerate,q,isaffectedbypermanentchangesinthesupplyordemandforacountry'sproducts.

ANSWERSTOTEXTBOOKPROBLEMS

1.RelativePPPpredictsthatinflationdifferentialsarematchedbychangesintheexchangerate.UnderrelativePPP,thefranc/rubleexchangeratewouldfallby95percentwithinflationratesof100percentinRussiaand5percentinSwitzerland.

2.Arealcurrencyappreciationmayresultfromanincreaseinthedemandfornontradedgoodsrelativetotradableswhichwouldcauseanappreciationoftheexchangeratesincetheincreaseinthedemandfornontradablesraisestheirprice,raisingthedomesticpricelevelandcausingthecurrencytoappreciate.Inthiscaseexportersareindeedhurt,asonecanseebyadaptingtheanalysisinChapter3.Realcurrencyappreciationmayoccurfordifferentreasons,however,withdifferentimplicationsforexporters'incomes.Ashiftinforeigndemandinfavorofdomesticexportswillbothappreciatethedomesticcurrencyinrealtermsandbenefitexporters.Similarly,productivitygrowthinexportsislikelytobenefitexporterswhilecausingarealcurrencyappreciation.Ifweconsideraceterusparibusincreaseintherealexchangerate,thisistypicallybadforexportersastheirexportsarenowmoreexpensivetoforeignerswhichmayreduceforeignexportdemand.Ingeneral,though,weneedtoknowwhytherealexchangeratechangedtointerprettheimpactofthechange.

3.a.Atiltofspendingtowardsnontradedproductscausestherealexchangeratetoappreciateasthepriceofnontradedgoodsrelativetotradedgoodsrises（therealexchangeratecanbeexpressedasthepriceoftradablestothepriceofnontradables）.

b.Ashiftinforeigndemandtowardsdomesticexportscausesanexcessdemandforthedomesticcountry'sgoodswhichcausestherelativepriceofthesegoodstorise;thatis,itcausestherealexchangerateofthedomesticcountrytoappreciate.

4.RelativePPPimpliesthatthepound/dollarexchangerateshouldbeadjustedtooffsettheinflationdifferencebetweentheUnitedStatesandBritainduringthewar.Thus,acentralbankermightcomparetheconsumerpriceindicesintheUnitedStatesandtheU.K.beforeandafterthewar.IfAmerica'spricelevelhadrisenby10percentwhilethatinBritainhadrisenby20percent,relativePPPwouldcallforapound/dollarexchangerate10percenthigherthanbeforethewar--a10percentdepreciationofthepoundagainstthedollar.

AcomparisonbasedonlyonPPPwouldfallshortofthetaskathand,however,ifitignoredpossiblechangesinproductivity,productivecapacityorinrelat