mankiw7e-chap15.ppt

1、MACROECONOMICS 2010 Worth Publishers,all rights reserved 2010 Worth Publishers,all rights reservedS E V E N T H E D I T I O NPowerPoint Slides by Ron CronovichN.Gregory MankiwC H A P T E RStabilization Policy15In this chapter,you will learn:about two policy debates:1.Should policy be active or passi

2、ve?2.Should policy be by rule or discretion?2CHAPTER 15 Stabilization PolicyQuestion 1:Should policy be active or passive?Growth rate of U.S.real GDP1970197519801985199019952000200520100246810-2-4Percent change from 4 quarters earlierAverage growth rateIncrease in unemployment during recessionspeakt

3、roughincrease in no.of unemployed persons(millions)July 1953May 19542.11Aug 1957April 19582.27April 1960February 19611.21December 1969November 19702.01November 1973March 19753.58January 1980July 19801.68July 1981November 19824.08July 1990March 19911.67March 2001November 20011.50Increase from 12/2007

4、 thru 6/2009:7.2 million!Increase from 12/2007 thru 6/2009:7.2 million!5CHAPTER 15 Stabilization PolicyArguments for active policyRecessions cause economic hardship for millions of people.The Employment Act of 1946:“It is the continuing policy and responsibility of the Federal Government topromote f

5、ull employment and production.”The model of aggregate demand and supply(Chaps.9-13)shows how fiscal and monetary policy can respond to shocks and stabilize the economy.6CHAPTER 15 Stabilization PolicyArguments against active policyPolicies act with long&variable lags,including:inside lag:the time be

6、tween the shock and the policy response.takes time to recognize shocktakes time to implement policy,especially fiscal policyoutside lag:the time it takes for policy to affect economy.If conditions change before policys impact is felt,the policy may destabilize the economy.7CHAPTER 15 Stabilization P

7、olicyAutomatic stabilizersdefinition:policies that stimulate or depress the economy when necessary without any deliberate policy change.Designed to reduce the lags associated with stabilization policy.Examples:income taxunemployment insurancewelfare8CHAPTER 15 Stabilization PolicyForecasting the mac

8、roeconomyBecause policies act with lags,policymakers must predict future conditions.Two ways economists generate forecasts:Leading economic indicators data series that fluctuate in advance of the economyMacroeconometric modelsLarge-scale models with estimated parameters that can be used to forecast

9、the response of endogenous variables to shocks and policies9CHAPTER 15 Stabilization PolicyThe LEI index and real GDP,1960ssource of LEI data:The Conference BoardThe Index of Leading Economic Indicators includes 10 data series(see p.258).10CHAPTER 15 Stabilization PolicyThe LEI index and real GDP,19

10、70ssource of LEI data:The Conference Board11CHAPTER 15 Stabilization PolicyThe LEI index and real GDP,1980ssource of LEI data:The Conference Board12CHAPTER 15 Stabilization PolicyThe LEI index and real GDP,1990ssource of LEI data:The Conference BoardMistakes forecasting the 1982 recessionUnemploymen

11、t rate14CHAPTER 15 Stabilization PolicyForecasting the macroeconomyBecause policies act with lags,policymakers must predict future conditions.The preceding slides show that the forecasts are often wrong.This is one reason why some economists oppose policy activism.15CHAPTER 15 Stabilization PolicyTh

12、e Lucas critiqueDue to Robert Lucaswho won Nobel Prize in 1995 for rational expectations.Forecasting the effects of policy changes has often been done using models estimated with historical data.Lucas pointed out that such predictions would not be valid if the policy change alters expectations in a

13、way that changes the fundamental relationships between variables.16CHAPTER 15 Stabilization PolicyAn example of the Lucas critiquePrediction(based on past experience):An increase in the money growth rate will reduce unemployment.The Lucas critique points out that increasing the money growth rate may

14、 raise expected inflation,in which case unemployment would not necessarily fall.17CHAPTER 15 Stabilization PolicyThe Jurys outLooking at recent history does not clearly answer Question 1:Its hard to identify shocks in the data.Its hard to tell how outcomes would have been different had actual polici

15、es not been used.18CHAPTER 15 Stabilization PolicyQuestion 2:Should policy be conducted by rule or discretion?19CHAPTER 15 Stabilization PolicyRules and discretion:Basic conceptsPolicy conducted by rule:Policymakers announce in advance how policy will respond in various situations,and commit themsel

16、ves to following through.Policy conducted by discretion:As events occur and circumstances change,policymakers use their judgment and apply whatever policies seem appropriate at the time.20CHAPTER 15 Stabilization PolicyArguments for rules1.Distrust of policymakers and the political processmisinformed politicianspoliticians interests sometimes not the same as the interests of society21CHAPTER 15 Stabilization PolicyArguments for rules2.The time inconsistency of discretionary policydef:A scenario