Mandel-Flemingov model Ključna pretpostavka: mala otvorena privreda sa savršenom mobilnošću kapitala. r = r* Ravnoteža na tržištu robe ---IS* kriva: In this and the following sections (in which we analyze policies with the M-F model), we assume the price level is fixed---just as we did when we first used the closed economy IS-LM model to do policy analysis in Chapter 11. As we learned in Chapter 5, NX depends on the real exchange rate. However, with price levels fixed, the real & nominal exchange rates move together. So, for simplicity, we write NX as a function of the nominal exchange rate here. (At the end of this chapter, when we use M-F to derive the aggregate demand curve, we go back to writing NX as a function of the real exchange rate, because the nominal & real exchange rates may behave differently when the price level is changing.) Chapter 5 introduced the notation r* for the world interest rate, and explained why r = r* in a small open economy with perfect capital mobility. Perfect capital mobility means that there are no restrictions on the international flow of financial capital: the country’s residents can borrow or lend as much as they wish in the world financial markets; and because the country is small, the amount its residents borrow or lend in the world financial market has no impact on the world interest rate. Chapter 5 also explained why net exports depend negatively on the exchange rate. S Gde je S = nominalni devizni kurs = inostrana valuta po jedinici domaće valute

IS* kriva: ravnoteža na robnom tržištu IS* kriva je definisana za datu vrednost r*. Intuitivni nalaz: Y S IS* S Again, “eq’m” is an abbreviation for “equilibrium.” The text (p. 315) shows how the Keynesian Cross can be used to derive the IS* curve. Suggestion: Before continuing, ask your students to figure out what happens to this IS* curve if taxes are reduced. Answer: The IS* curve shifts rightward (i. e., upward). Explanation: Start at any point on the initial IS* curve. At this point, initially, Y = C + I + G + NX. Now cut taxes. At the initial value of Y, disposable income is higher, causing consumption to be higher. Other things equal, the goods market is out of whack: C + I + G + NX > Y. An increase in Y (of just the right amount) would restore equilibrium. Hence, each value of e is associated with a larger value of Y. OR, a decrease in NX of just the right amount would restore equilibrium at the initial value of Y. But the decrease in NX requires an increase in e. Hence, each value of Y is associated with a higher value of e. Rationale: Doing this exercise now will break up your lecture, and will prepare students for the fiscal policy experiment that is coming up in just a few slides.

LM* kriva LM* kriva definisana je za datu vrednost r* Vertikalna je jer: za dato r*, postoji samo jedna vrednost Y koja izjednačava tražnju i ponudu novca, nezavisno od S. Y S LM* The text (p.316) shows how the LM curve in (Y,r) space, together with the fixed r*, determines the value of Y at which the LM* curve here is vertical. Suggestion: Before continuing, ask your students to figure out what happens to this LM* curve if the money supply is increased. Answer: LM* shifts to the right. Explanation: The equation for the LM* curve is: M/P = L(r*, Y) P is fixed, r* is exogenous, the central bank sets M, then Y must adjust to equate money demand (L) with money supply (M/P). Now, if M is raised, then money demand must rise to restore equilibrium (remember: P is fixed). A fall in r would cause money demand to rise, but in a small open economy, r = r* is exogenous. Hence, the only way to restore equilibrium is for Y to rise. Rationale: Doing this exercise now will break up your lecture, and will prepare students for the monetary policy experiment that is coming up in just a few slides.

Ravnoteža u Mandel-Flemingovom model S Y S LM* IS* Ravnotežni devizni kurs Ravnotežni nivo dohotka

Fleksibilni i fiksni devizni kursevi U sistemu fleksibilnog kursa, S fluktuira sa promenom uslova privređivanja. Nasuprot tome, pri fiksnom kursu, centralna banka trguje inostranom valutom po unapred utvrđenoj ceni. Sada ćemo ispitivati fiskalnu, monetarnu i spoljnotrgovinsku politiku : najpre u sistemu fleksibilnog, a zatim u sistemu fiksnog kursa.

Fiskalna politika pri fleksibilnom kursu Y S Pri bilo kojoj vrednosti S, fiskalna ekspanzija će povećati Y, pomerajući IS* udesno. S2 S1 Intuition for the shift in IS*: At a given value of e (and hence NX), an increase in G causes an increase in the value of Y that equates planned expenditure with actual expenditure. Intuition for the rezults: As we learned in earlier chapters, a fiscal expansion puts upward pressure on the country’s interest rate. In a small open economy with perfect capital mobility, as soon as the domestic interest rate rises even the tiniest bit about the world rate, tons of foreign (financial) capital will flow in to take advantage of the rate difference. But for foreigners to buy these U.S. bonds, they must first acquire U.S. dollars. Hence, the capital inflows rezult in an increase in foreign demand for dollars in the foreign exchange market, causing the dollar to appreciate. This appreciation makes exports more expensive to foreigners, and imports cheaper to people at home, and thus causes NX to fall. The fall in NX offsets the effect of the fiscal expansion. How do we know that Y = 0? Because maintaining equilibrium in the money market requires that Y be unchanged: the fiscal expansion does not affect either the real money supply (M/P) or the world interest rate (because this economy is “small”). Hence, any change in income would throw the money market out of whack. So, the exchange rate has to rise until NX has fallen enough to perfectly offset the expansionary impact of the fiscal policy on output. rezultati: S > 0, Y = 0 Y1

Zaključci o fiskalnoj politici U maloj otvorenoj privredi sa savršenom mobilnošću kapitala, fiskalna politika ne moće da utiče na izmenu realnog BDP. ISTISKIVANJE - “Crowding out” U zatvorenoj privredi: fiskalna politika istiskuje investicije tako što izaziva rast kamatne stope U maloj otvorenoj privredi: fiskalna politika istiskuje neto izvoz tako što izaziva apresijaciju deviznog kursa

Monetarna politika pri fleksibilnom kursu Y S Y1 Rast M pomera LM* udesno jer Y mora da raste da bi se povratila ravnoteža na novčanom tržištu. S1 Suggestion: Treat this experiment as an in-class exercise. Display the graph with the initial equilibrium. Then give students 2-3 minutes to use the model to determine the effects of an increase in M on e and Y. Intuition for the rightward LM* shift: At the initial (r*,Y), an increase in M throws the money market out of whack. To restore equilibrium, either Y must rise, or the interest rate must fall, or some combination of the two. In a small open economy, though, the interest rate cannot fall. So Y must rise to restore equilibrium in the money market. Intuition for the rezults: Initially, the increase in the money supply puts downward pressure on the interest rate. (In a closed economy, the interest rate would fall.) Because the economy is small and open, when the interest rate tries to fall below r*, savers send their loanable funds to the world financial market. This capital outflow causes the exchange rate to fall, which causes NX-- and hence Y--to increase. S2 rezultat: S < 0, Y > 0 Y2

Zaključci o monetarnoj politici Monetarna politika deluje na output tako što utiče na jednu ili više komponenti agregatne tražnje: zatvorena privreda: M  r  I  Y Mala otvorena privreda: M  S  NX Y Ekspanzivna monetarna politika ne podiže svetsku agregatnu tražnju već premešta tražnju sa inostranih na domaće proizvode. Na taj način rast dohotka i zaposlenosti kod kuće dešava se na račun gubitaka neke druge zemlje. Suggestion: Before revealing the text on this slide, ask students to take out a piece of paper and answer this question: “Contrast the way in which monetary policy affects output in the closed economy with the small open economy.” Or something to that effect.

Spoljnotrgovinska politika pri fleksibilnom kursu Y S S1 Y1 Pri bilo kojoj datoj vrednosti S, carine ili kvote smanjuju uvoz, povećavaju NX, i pomeraju IS* krivu udesno. S2 Intuition for rezults: At the initial exchange rate, the tariff or quota shifts domestic residents’ demand from foreign to domestic goods. The reduction in their demand for foreign goods causes a corresponding reduction in the supply of the country’s currency in the foreign exchange market. This causes the exchange rate to rise. The appreciation reduces NX, offsetting the import restriction’s initial expansion of NX. How do we know that the effect of the appreciation on NX exactly cancels out the effect of the import restriction on NX? There is only one value of Y that allows the money market to clear; since Y, C, I, and G are all unchanged, NX = Y-(C+I+G) must also be unchanged. Or looking at it differently: As we learned in chapter 5, the accounting identities say that NX = S - I. The import restriction does not affect S or I, so it cannot affect the equilibrium value of NX. rezultat: S > 0, Y = 0

Zaključci o spoljnotrgovinskoj politici Uvozne restrikcije ne mogu smanjiti deficit. Čak i pri nepromenjenom NX, razmena se smanjuje: Restrikcije smanjuju uvoz Apresijacija smanjuje izvoz Pad razmene vodi padu “koristi od razmene’ Uvozne restrikcije čuvaju radna mesta u domaćoj industriji, ali uništavaju radna mesta u izvoznom sektoru Stoga uvozne restrikcije ne mogu da doprinesu rastu ukupne zaposlenosti. Što je još gore, uvozne restrikcije prave “sektorsko prebacivanje,” što deluje na rast frikcionalne nezaposlenosti Import restrictions cause a sectoral shift, a shift in demand from export-producing sectors to import-competing sectors. As we learned in Chapter 6, sectoral shifts contribute to the natural rate of unemployment, because displaced workers in declining sectors take time to be matched with appropriate jobs in other sectors.

Fiksni devizni kurs Centralna banka se obavezuje da proda ili kupi domaću valutu po unapred definisanoj ceni. U MF, centralna banka pomera LM* krivu kako bi zadržala S na ranije objavljenom nivou. Ovaj sistem podrazumeva da se fiksira nominalni devizni kurs. Na dugi rok, kada su cene fleksibilne, realni kurs može da se menja čak i ako je nominalni kurs fiksiran.

Fiskalna politika pri fiksnom kursu Pri fleksiblinom kursu, fiskalna ekspanzija bi povećala S. Pri fleksibilnom kursu, fiskalna politika je neefikasna Pri fiksnom kursu, fiskalna politika je vrlo efikasna pri promeni outputa. Y S Da bi sprečila S da raste, centralna banka mora da prodaje domaću valutu, što povećava M i pomera LM* udesno. S Rezultat: S = 0, Y > 0 Y1 Y2

Mon. policy under fixed exchange rates Rast M pomera LM* udesno i obara S. Pri fleksibilnom kursu, monetarna politika vrlo efikasno menja output. Pri fiksnom kursu, monetarna poltika ne menja nivo outputa, endogena je. Y S Y1 S1 Da bi sprečila pad S, centralna banka mora da otkupljuje domaću valutu, što smanjujeM i pomera LM* ulevo. The monetary expansion puts downward pressure on the exchange rate. To prevent it from falling, the central bank starts buying domestic currency in greater quantities to “prop up” the value of the currency in foreign exchange markets. This buying removes domestic currency from circulation, causing the money supply to fall, which shifts the LM* curve back. Another way of looking at it: to keep the exchange rate fixed, the central bank must use monetary policy to shift LM* as required so that the intersection of LM* and IS* always occurs at the desired exchange rate. Unless the IS* curve shifts right (an experiment we are not considering now), the central bank simply cannot increase the money supply. Rezultat: S = 0, Y = 0

Spoljnotrgovinska politika pri fiksnom deviznom kursu Pri fleksibilnom kursu, uvozne restrikcije ne utiču na Y niti na NX. Pri fiksnom kursu uvozne restrikcije dovode do rasta Y i NX. Ali ovaj dobitak se ostvaruje na račun drugih jer se tražnja pomera sa stranih na domaće proizvode, tzv. “beggar-thy-neighbour-policy” Restrikcije na uvoz vode apresijaciji S. Y S Y1 S1 Da bi sprečilo S da raste, centralna banka mora da prodaje domaću valutu, što vodi rastu M i pomera LM* udesno. Suggestion: Assign this experiment as an in-class exercise. Give students 3 minutes to work on it before displaying the answer on the screen. Rezultat: e = 0, Y > 0 Y2

M-F: summary of policy effects Režim defiznog kursa: plivajući fiksni impact on: Politika Y S NX Fiskalna ekspanzija   monet. ekspanzija Uvozne restrikcije Table 12-1 on p. 327. (“M-F” = “Mundell-Fleming”) This table makes it easy to see that the effects of policies depend very much on whether exchange rates are fixed or flexible.

Razlika u kamatnoj stopi Ima dva razloga zbog kojih se r može razlikovati od r* Rizik zemlje - country risk: Rizik neplaćanja dospelih obaveza usled političkih ili privrednih turbulencija. Kreditori traže vežu kamatnu stopu da bi se obezbedili od rizika. Očekivane promene deviznog kursa Ako se očekuje depresijacija, onda zajmoprimci moraju da plate veću kamatnu stopu da bi kompenzovali kreditore za iznos očekivane depresijacije

Razlike u M-F modelu  je premija na rizik. Ako ovaj izraz zemenimo u jednačine IS* i LM* : S The first equation says that a country’s interest rate equals the world interest rate plus a risk premium (whose size depends on investors’ perceptions of the political and economic risk of holding that country’s assets and on the expected rate of depreciation or appreciation of the country’s currency. We can now use the M-F model to analyze the effects of a change in the risk premium. The next few slides present this analysis, then discuss an important real-world example (the Mexican peso crisis).

Efekti rasta  rezultat: S < 0, Y > 0 IS* se pomera ulevo, jer    r  I Y S Y1 S1 LM* se pomera udeasno, jer    r  (M/P )d, te Y mora da raste da bi se obezbedila ravnoteža na tržištu novca. Intuition: If prospective lenders expect the country’s currency to depreciation, or if they perceive that the country’s assets are especially risky, then they will demand that borrowers in that country pay them a higher interest rate (over and above r*). The higher interest rate reduces investment and shifts the IS* curve to the left. But it also lowers money demand, so income must rise to restore money market equilibrium. Why does the exchange rate fall? The increase in the risk premium causes foreign investors to sell some of their holdings of domestic assets and pull their ‘loanable funds’ out of the country. The capital outflow causes an increase in the supply of domestic currency in the foreign exchange market, which causes the fall in the exchange rate. Or, in simpler terms, an increase in country risk or an expected depreciation makes holding the country’s currency less desirable. S2 rezultat: S < 0, Y > 0 Y2

Efekti rasta  Pad S je intuitivno jasan: Rast rizika zemlje ili očekivana depresijacija destimuliše privredne subjeke da drže domaću valutu NAPOMENA: očekivana depresijacija predstavlja samoispunjavajuće proročanstvo Rast Y se javlja zbog rasta NX (zbog depresijacije) Koji je još veći nego što je bio pad I (zbog rasta r ).

Zašto dohodak možda neće porasti Centralna banka može da spreči depresijaciju smanjuući ponudu novca Depresijacija bi mogla da podigne cene uvozne robe, te da dovede do rasta novoa cena (što bi smanjilo ponudu realnog novca) Potrošači bi mogli da na rastući rizik odgovore tako što drže više novca Sve ove promene bi pomerile LM* ulevo. The rezult that income rises when the risk premium rises seems counter-intuitive and inaccurate. This slide explains why the increase in the risk premium may cause other things to occur that prevent income from rising, and may even cause income to fall.

Kriza meksičkog pezosa Mexico’s central bank had maintained a fixed exchange rate with the U.S. dollar at about 29 cents per peso.

Kriza meksičkog pezosa In the week before Christmas 1994, the central bank abandoned the fixed exchange rate, allowing the peso’s value to “float.” Then, in just one week, the peso lost nearly 40% of its value, falling further during the following months.

Kriza prezosa nije pogodila samo Meksiko Američka dobra postala su skuplja za Meksikance Firme iz SAD su izgubile prihode Stotine bankrotstava duž granice SAD-Meksiko Dolarska vrednost meksičke finansijske aktive se smanjila Uštede u pezionim fondovima miliona građana SAD su se smanjila The purpose of this slide is to motivate the topic. Even though this occurred in another country some years ago, it was very important for the U.S. The parents of many of your students probably held Mexican assets (indirectly through mutual funds in their 401k accounts and pension funds, which viewed Mexico very favorably prior to the crisis) and took losses when the crisis occurred.

Kriza Ustanak seljaka u Chiapasu Početkom 90tih, Meksiko je postao atratkivno mesto za strana ulaganja. Tokom 1994, potitički događaji izazvali su rast premije na rizik ( ): Ustanak seljaka u Chiapasu Ubistvo vodećeg predsedničkog kandidata Naredni faktor: The Federal Reserve je podigla američku kamatnu stopu da bi sprečila inflaicju u SAD. (tako je r* > 0) When the last line displays, it might be helpful to note that, from Mexico’s viewpoint, the U.S. interest rate is r*.

Kriza To se odrazilo na pritisak da pezos devalvira Meksička centralna banka neprestano obećavala da neće dozvoliti pad pezosa, te je prodavala devizne rezerve da bi održala fiksni kurs Takva politika je zahtevala da Centralna banka Meksika raspolaže adekvatnim deviznim rezervama. Da li je to bilo tačno? We have already seen why an increase in a country’s risk premium causes its exchange rate to fall. One could also use the M-F model to show that an increase in r* also causes the exchange rate to fall. The intuition is as follows: An increase in foreign interest rates causes capital outflows: investors shift some of their funds out of the country to take advantage of higher returns abroad. This capital outflow causes the exchange rate to fall, as it implies an increase in the supply of the country’s currency in the foreign exchange market.

Dollar reserves of Mexico’s central bank Decembar 1993 ……………… $28 mlrd 17. Avgust 1994 ……………… $17 mlrd 1 .Decembar 1994 …………… $ 9 mlrd 15. Decembar 1994 ………… $ 7 billion Defending the peso in the face of large capital outflows was draining the reserves of Mexico’s central bank. (August 17, 1994 was the date of Mexico’s presidential election.) Ask your students if they can figure out why Mexico’s central bank didn’t tell anybody it was running out of reserves. The answer: If people had known that the reserves were dwindling, then they would also have known that the central bank would soon have to devalue or abandon the fixed exchange rate altogether. They would have expected the peso to fall, which would have caused a further increase in Mexico’s risk premium, which would have put even more downward pressure on Mexico’s exchange rate and made it even harder for the central bank to “defend the peso.” Source (not only for the data on this slide, but some of the other information in this case study): Washington Post National Weekly Edition, pp. 8-9, Feb. 20-26 1995, various issues of The Economist in Jan. & Feb. '95. Tokom 1994, Centralna banka Meksika sakrivala je podatak da njene devizne rezerve polako nestaju

 katastrofa  (S pada sa 29 na 25 centi za pezosi) 2. decembra: Meksički pezos devalvira za 13% (S pada sa 29 na 25 centi za pezosi) Investitori su šokirani! ! ! …i uviđaju da mora biti da su se rezerve centralne banke istopile… , investitori izvlače svoj kapital iz Meksika. 22. decembar: rezerve Centralne banke skoro su nestale. Ona napušta fiksni kurs i pušta S da pliva. Za nedelju dana, S pada za još 30%.

Spasavanje 1995: SAD. i IMF daju kredit od $50 milijardi dolara koji bi služio kao garancija za kreditnu sposobnost meksičke vlade. To je pomoglo da se povrati poverenje investitora i da se smanji premija na rizik. Nakon teške recesije u 1995. godini, Meksiko započinje brzi oporavak. The case study on pp. 330-331 gives more detail on the peso crisis.

Plivajući vs. Fiksni kursevi Argumenti za plivajući kurs: Dozvoljava da se monetarnom politikom aktivira za druge ciljeve (rast, obaranje inflacije) Argumenti za fiksni kurs: Izbegava se neizvestnost i nestabilnost, olakšavaju se međunarodne transakcije Uvodi disciplinu u vođenje monetarne politike, onemogućava preveliki rast novčane mase i eliminiše mogućnost hiperinflacije

Mandel-Flemingov model i AD kriva Do sada, cene u MF modelu, P, bile su fiksne. Sada: da bismo izveli AD krivu, moramo dozvoliti promenu cena P Sada jednačinu pišemo kao : s Net exports really depend on the real exchange rate, not the nominal exchange rate. Earlier in the chapter, we wrote NX as a function of the nominal rate, because the price level was assumed fixed, so the nominal & real rates always moved together. But now, with the price level changing also, we need to write NX as a function of the real exchange rate. (ranije je P bilo fiksno, te smo mogli da pišemo da je NX funkcija S, a ne funkcija s.)

Izvodjenje AD krive  Y Zašto AD kriva ima negativan nagib: s2 s1 P LM*(P2) LM*(P1) Zašto AD kriva ima negativan nagib: IS* s2 s1 P  (M/P )  LM shifts left Y2 Y1 Y P  s P2 Like figure 12-12 on p.336, except here we are showing what happens to Y when P increases (not falls). The derivation of the open economy AD curve is very similar to that of the closed economy AD curve (see chapter 11).  NX P1  Y AD Y2 Y1

Od kratkog ka dugom roku Za Y  P IS* AD LRAS LM*(P2) P2 SRAS2 LM*(P1) Javlja se pritisak na cene u pradu njihovog smanjenja. 1 2 Vremenom će P početi da pada, izazivajući (M/P ) s  NX  Y  P1 SRAS1 Figure 12-13 on p.337. Suggestion: Have your students draw the two panels of the diagram on this screen, with the economy in an initial equilibrium with output equal to its natural rate. Then, have them use their diagrams to analyze the short-run and long-run effects of a negative IS* shock.

Velika privreda: nešto između male i zatvorene privrede Mnoge zemlje nisu ni zatvorene niti su male i otvorene Velika otvorena privreda negde je između krajnjih tačaka U slučaju monetarne ekspanzije: Kao u zatvorenoj privredi M > 0  r  I (ali ne sasvim kao pre) Kao u otvorenoj privredi, M > 0    NX (ali ne istim intenzitetom) For more details, see the Appendix to Chapter 12 (not included in this PowerPoint presentation).

Rezime IS-LM model za malu otvorenu privredu. Uzima se da je P dato 1. Mandel-Flemingov model IS-LM model za malu otvorenu privredu. Uzima se da je P dato Pokazuje kako politike i šokovi utiču na dohodak i na devizni kurs 2. Fiskalna politika Ima uticaja pri fiksnom ali ne i pri fleksibilnom kursu

Rezime Ima uticaja pri fleksibilnom kursu. 3. Monetarna poltiika Ima uticaja pri fleksibilnom kursu. Pri fiksnom kursu neće delovati na output. Razlike u kamatnoj stopi postoje Ako invstitori traže premiju na rizik da bi držali domaću finansijsku aktivu. Rast premije na rizik podiže domaću kamatnu stopu i izaziva depresijaciju valute.

Rezime Pri fleksibilnom kursu monetarna politika se može posvetiti drugim ciljevima, a ne samo održanju fisnog pariteta Fiksni kurs smanjuje neke neizvesnosti u međunarodnim transakcijama

Ravnoteža u IS-LM modelu IS kriva predstavlja ravnotežnu na robnom trž. Y r LM IS r1 LM kriva predstavlja ravnotežu na novčanom tržištu. Y1 U preseku se nalazi jedinstvena kombinacija Y i r koja obezbeđuje ravnotežu na oba tržišta

IS-LM i agregatna tražnja Do sada smo koristili IS-LM model za analizu kratkog roka, kada su cene fiksneto analyze the short run, when the price level is assumed fixed. Međutim, promena P pomera LM krivu te stoga utiče i na dohodak - Y. Kriva agregatne tražnje opisuje relaciju P i Y

Izvođenje AD krive  Y Intuitivno objašnjenje nagiba AD krive: LM(P2) Intuitivno objašnjenje nagiba AD krive: P  (M/P )  LM ide ulevo  r  I  Y IS LM(P1) r2 r1 Y2 Y1 Y P P2 Reminder: here see AD story different from microeconomic Demand curve for a single commodity. Note: we draw P1 before drawing LM curve: The position of the LM curve depends on the vrednost of M/P. M is an exogenous policy variable. So, if P is low (like P1 in the lower panel of the diagram), then M/P is relatively high, so the LM curve is over toward the right in the upper diagram. If P is high, like P2, then M/P is relatively low, so the LM curve is more toward the left. P1 AD Y2 Y1

Monetarna politika i AD kriva Y r LM(M1/P1) CB može da poveća agregatnu tražnju: M  LM ide udesno IS LM(M2/P1) r1 Y1 r2 Y2  r  I  Y ta svaku vrednost P Y P AD2 AD1 It’s worth taking a moment to explain why we are holding P fixed at P1: To find out whether the AD curve shifts to the left or right, we need to find out what happens to the vrednost of Y associated with any given vrednost of P. This is not to say that the equilibrium vrednost of P will remain fixed after the policy change (though, in fact, we are assuming P is fixed in the short run). We just want to see what happens to the AD curve. Once we know how the AD curve shifts, we can then add the AS curves (short- or long-run) to find out what, if anything, happens to P (in the short- or long-run). P1

Fiskalna politika i AD kriva Y r Ekspanzivna fiskalna politika(G i/or T ) povećava agreg. tražnju: T  C  IS ide udesno  Y za svaku vrednost P LM IS2 Y2 r2 IS1 Y1 r1 Y P AD2 AD1 P1

Efikasnost ek.politike fiskalna politika je sve efikasnija (Y sve više raste) što je: LM ravnija LM Y1 IS1 r 1 Y2 IS2 2 Pošto rast G povećava Y, rast tražnje za novcem ne podiže r preterano: te se investicije ne istiskuju preterano!. LM’ Y2’ 2’

Efikasnost ek. politike Monetarna politika biće sve efikasnija (Y će sve brže rasti) što je: IS ravnija Rast M smanjuje kamatnu stopu (r), Investicije rastu više kao reakcija na pad r, te output više raste r IS LM1 LM2 1 Y2’ 2’ 2 IS’ Y1 Y2

IS-LM i AD-AS na kratak i na dugi rok Od kratkog ka dugom roku vodi nas postepeno cenovno prilagođavanje. rasti Ako kratak rok Onda će vremenom nivo cena The next few slides put our IS-LM-AD in the context of the bigger picture - the AD-AS model in the short-run i long-run, which was introduced in Chapter 9. padati Ostati isti

SR i LR efekti nekog IS šoka Y r LRAS LM(P1) IS1 IS2 AD2 Negativni IS šok pomera IS i AD ulevo, te Y pada. AD1 Y P LRAS SRAS1 P1 Abbreviation: SR = short run, LR = long run

SR i LR efekti nekog IS šoka Y r LRAS LM(P1) U novoj kratkoročnoj ravnoteži, IS2 IS1 Y P LRAS AD2 SRAS1 P1 AD1

SR i LR efekti šoka IS LM(P1) U novoj kratkoročnoj ravnoteži, , IS1 Y r LRAS LM(P1) U novoj kratkoročnoj ravnoteži, , IS2 IS1 Vremenom, P postepeno pada, što izaziva da SRAS ide dole M/P raste, te se LM spušta naniže Y P LRAS AD2 SRAS1 P1 AD1

SR i LR efekti IS šoka LM(P1) LM(P2) IS1 IS2 Y r LRAS LM(P1) SRAS2 P2 LM(P2) IS2 IS1 Vremenom, P postepeno pada, što izaziva da SRAS ide dole M/P raste, te se LM spušta naniže Y P LRAS AD2 SRAS1 P1 AD1

SR i LR efekti IS šoka LM(P1) LM(P2) Y r LRAS LM(P1) SRAS2 P2 LM(P2) IS2 Proces se nastavlja sve dok privreda ne dostigne dugoročnu ravnotežu IS1 Y P LRAS AD2 SRAS1 A good thing to do: Go back through this experiment again, i see if your students can figure out what is happening to the other endogenous variables (C, I, u) in the short run i long run. P1 AD1

Vežba Analiza SR & LR efekata M Nacrtati IS-LM i AD-AS dijagrame kao ove ovde, Pokazati kratkororčni efekat mere CB kojom se povećava M. Obeležite tačke i pokažite strelicama kretanje krive. Pokažite tranziciju od kratkog na dugi rok. Kakva je relacija SR i LR vrednosti? Y r LRAS LM(M1/P1) IS Y P AD1 LRAS This exercise has two objectives: 1. To give students immediate reinforcement of the preceding concepts. 2. To show them that money is neutral in the long run, just like in chapter 4. You might have your students try other exercises using this framework: * the short-run i long-run effects of Ekspanzivna fiscal policy. Have them compare the long-run results in this framework with the results they obtained when doing the same experiment in Chapter 3 (the loanable funds model). SRAS1 P1

Analiza -SR r0 r1 Y1 Y1 LM(M1/P1) IS LM(M2/P1) AD1 AD2 r Kratak rok: Rast M povećava ponudu realnog novca i pomera LM krivu udesno. Što pomera AD krivu udesno. Ravnoteža ide iz tačke 0 u tačku 1. Output raste do Y1. Obratite pažnju da kamatna Stopa pada sa r0 na r1. LRAS LM(M1/P1) IS r0 LM(M2/P1) r1 1 Y1 Y P AD1 AD2 LRAS This exercise has two objectives: 1. To give students immediate reinforcement of the preceding concepts. 2. To show them that money is neutral in the long run, just like in chapter 4. You might have your students try other exercises using this framework: * the short-run i long-run effects of Ekspanzivna fiscal policy. Have them compare the long-run results in this framework with the results they obtained when doing the same experiment in Chapter 3 (the loanable funds model). * Immediately after a negative shock pushes output below its natural rate, show how monetary or fiskalna politikacan be used to restore full-employment immediately (i.e., without waiting for prices to adjust). SRAS1 P1 1 Y1

Analiza - LR r0 r1 Y1 Y1 LM(M2/P2) IS LM(M2/P1) AD1 AD2 Cene rastu proporcionalno M, sa P1 na P2, Tako se realna ponuda novca vraća na prvobitni nivo: M2/P2 = M1/P1. Te se LM curve vraća u prvobitni položaj. Ravnoteža se pomera iz tačke 1 u tačku 2. Output i kamata se takođe vraćaju u tačku 0. Y r LRAS LM(M2/P2) IS r0 0,2 LM(M2/P1) r1 1 Y1 Y P AD1 AD2 LRAS SRAS2 P2 This exercise has two objectives: 1. To give students immediate reinforcement of the preceding concepts. 2. To show them that money is neutral in the long run, just like in chapter 4. You might have your students try other exercises using this framework: * the short-run i long-run effects of Ekspanzivna fiscal policy. Have them compare the long-run results in this framework with the results they obtained when doing the same experiment in Chapter 3 (the loanable funds model). * Immediately after a negative shock pushes output below its natural rate, show how monetary or fiskalna politikacan be used to restore full-employment immediately (i.e., without waiting for prices to adjust). 2 SRAS1 P1 1 Y1

Nezaposlenost(desna skala) Velika depresija Nezaposlenost(desna skala) Realni GNP (leva skala) This chart presents data from Table 11-2 on p.296 of the text. For data sources, see notes accompanying that table. Note the very strong negative correlation between output i unemployment.

Great Depression: Observations Realni tokovi: Output: pad Consumption: pad Investment: pad veliki Gov. purchases: fall (sa docnjom)

Great Depression: Observations Nominalna strana: Nominalna kamatna stopa: pad Novčana ponuda (nominalna): pad Nivo cena: pad (deflacija)

Šok IS krive? Egzogeni pad tražnje za dobrima i uslugama - -- IS kriva otišla ulevo dokaz: pad outputa i kamatne stope, kao pri pomeranju IS krive ulevo

Razlozi za pomeranje IS krive Slom berze  egzogeni C Oct-Dec 1929: S&P 500 pao 17% Oct 1929-Dec 1933: S&P 500 pao 71% Pad investicija “korekcija” nakon prevelike gradnje 1920-ih Krah banaka smanjio ponudu novca Restriktivna fiskalna politika Poreski prihodi su padali te su političari povećavali poreze i smanjivali G In item 2, I’m using the term “correction” in the stock market sense.

Ogromni pad novčane ponude dokaz: M1 pao 25% 1929-33. Ali : Šok LM krive Ogromni pad novčane ponude dokaz: M1 pao 25% 1929-33. Ali : P je još više pala, te je M/P čak malo porastao 1929-31. Nominalne kamatne sotpe su pale, što se ne bi desilo da je LM otišla ulevo.

A revision to the Money Hypothesis Velika deflacija: P je pala preko 25% 1929-33. Nagli pad očekivane inflacije zači da je za bilo koju nominalnu kamatnu stopu (i) ex ante r = i – e To je moglo da obeshrabri investitore i izazove depresiju Pošto je verovatno izazvana padom M, aktivna monetarna politika je mogla biti od pomoći.

Zašto se ne može ponoviti Političari i njihovi savetnici više znaju nego tada: CB ne bi pustila da M toliko padne. Fiskalna politika više ne diže poreze u recesiji niti smanjuje G. Osiguranje bankarskih depozita štiti od kraha banaka. Automatski stabilizatori Examples of automatic stabilizers: the income tax: people pay less taxes automatically if their income falls unemployment insurance: prevents income - i hence spending - from pad as much during a downturn This is discussed in Chapter 14.

Rezime 1. IS-LM model egzogene: M, G, T, P egzogeno na kratrak rok, Y egzogeno na dugi rok endogene: r, Y endogeno na kratak rok, P na dugi rok

Rezime 2. AD kriva Pokazuje relaciju izmeđuP i ravnotežne vrednosti Y iz IS-LM modela Negativni nagib jer P  (M/P )  r  I  Y Ekspanzivna fiskalna politika pomera IS udesno, podiže dohodak i pomera AD udesno Ekspanzivna monetarna politika pomera LM krivu udesno, povećava dohodak i AD ide udesno

Algebra AD krive Ako imamo sistem:

Algebra AD krive Use the goods market equilibrium condition Y = C + I + G Solve for Y: A line relating Y to r with slope –d/(1-b) Can see multipliers here: rise in Y taking r as given. But r is an endogenous variable i it will change…

Algebra AD krive Use the money market to find a vrednost for r: As done for the LM curve previously, suppose the money market is characterized by: Equilibrium in money market requires: Line with slope = e/f

Algebra AD krive Now combine the two, substituting in for r: Solve for Y. For convenience, define a term:

Algebra AD krive P This implies a negative relationship between output (Y) i price level (P): an Aggregate Demand curve. AD Y This math can help reveal under what conditions monetary i fiscal policies will be most effective…

Efikasnost ek. politike fiskalna politikais effective (Y will rise much) when: LM flatter (f large or e small, so z near 1) As the rise in G raises Y, the increase in money Demand does not raise r much: -small e:Md not responsive to Y -large f: Md is responsive to r so investment is not crowded out as much. LM Y1 IS1 r 1 Y2 IS2 2 LM’ Y2’ 2’

Efikasnost ek. politike Monetarna politika is effective (Y will rise much) when: IS flatter (d large: Investment is responsive to r) As a rise in M lowers the interest rate (r), investment rises more in response to the fall in r, so output rises more. r IS LM1 LM2 1 Y2’ 2’ 2 IS’ Y1 Y2