Академический Документы
Профессиональный Документы
Культура Документы
International Macroeconomics
Columbia University
1
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
2
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
3
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
Document the
4
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
13
−4 100
12
−6 Index, 2008 = 100 90
11
Percent
Percent
−8 80 10
9
−10 70
8
−12 60
7
−14 50 6
2002 2004 2006 2008 2010 2002 2004 2006 2008 2010 2002 2004 2006 2008 2010
Date Date Date
5
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
Spain
Current Account / GDP Labor Cost Index, Nominal Unemployment Rate
−3 110 22
−4 20
100
−5
18
Index, 2008 = 100
−6 90
Percent
Percent
16
−7
14
−8 80
12
−9
70
−10 10
−11 60 8
2002 2004 2006 2008 2010 2002 2004 2006 2008 2010 2002 2004 2006 2008 2010
Date Date Date
6
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
Greece
Current Account / GDP Labor Cost Index, Nominal Unemployment Rate
−4 110 18
−6 16
100
Index, 2008 = 100
−8 14
90
Percent
Percent
−10 12
80
−12 10
70
−14 8
−16 60 6
2002 2004 2006 2008 2010 2002 2004 2006 2008 2010 2002 2004 2006 2008 2010
Date Date Date
7
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
Portugal
Current Account / GDP Labor Cost Index, Nominal Unemployment Rate
−6 105 14
−7 100
12
−8
Index, 2008 = 100
95
10
Percent
Percent
−9
90
−10
8
85
−11
6
−12 80
−13 75 4
2002 2004 2006 2008 2010 2002 2004 2006 2008 2010 2002 2004 2006 2008 2010
Date Date Date
8
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
The next graph plots the real effective exchange rate REER =
avg(SP ∗)/P , where P represents the domestic consumer price index
(CPI), P ∗ represents the foreign CPI and S represents the nominal
exchange rate. The qualifier ‘effective’ indicates that instead of
measuring SP ∗ from single foreign country, a weighted average of
SP ∗ is computed across the country’s trading partners. In this case
39 trading partners are included. The weights are based on the trade
shares with each trading partner.
9
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
As with RER, when REER goes up, we say that the real exchange
rate depreciates.
10
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
Cyprus Greece
120
115 120
115
110
110
105
105
100 100
95 95
2000 2005 2010 2000 2005 2010
Spain Portugal
120 115
115
110
110
105
105
100
100
95 95
2000 2005 2010 2000 2005 2010
Source: Harmonised competitiveness indicators based on consumer price indices produced by the
European Central Bank.
11
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
• Compare this with the large real depreciations that we saw for the
Sudden Stops in Iceland in 2008 (about 50%), Chile, 1979-1985,
(close to 100%) and in Argentina, 2001-2002, (about 200%) .
12
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
14
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
U.S. data, SIPP panel 1986-1993, between interviews one year apart.
15
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
16
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
17
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
18
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
19
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
20
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
0.05
−0.05
−0.1
1929:8=0
−0.15
−0.2
−0.25
Solid line: natural logarithm of an index of manufacturing money wage rates. Broken line: loga-
21
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
• Countries that left the gold standard earlier recovered faster than
countries that remained on gold.
• Look at the figure on the next slide. Between 1929 and 1935,
sterling-bloc countries experienced less real wage growth and larger
increases in industrial production than gold-bloc countries.
22
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
130
Finland
Denmark
Sweden
120
United Kingdom
110
Industrial Production, 1935, (1929=100)
Norway
100 Germany
Italy
Netherlands
90
80
Belgium
France
70
50 100 150 200
Real Wage, 1935, (1929=100)
23
Source. Eichengreen and Sachs (1985).
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
• Argentina: pegged the peso at a 1-to-1 rate with the dollar be-
tween 1991 and 2001.
Argentina 1996-2006
Nominal Exchange Rate (E ) Unemployment Rate + Underemployment Rate
t
4 40
Percent
2 30
1 25
0 20
1996 1998 2000 2002 2004 2006 1996 1998 2000 2002 2004 2006
Year Year
1.2
Pesos per Hour
Index 1996=1
12
1
0.8
6 0.6
0.4
1996 1998 2000 2002 2004 2006 1996 1998 2000 2002 2004 2006
Year Year
25
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
• The slide following the table explains how to use the information
in the table to infer a range for γ.
26
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
Source: EuroStat.
27
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
How To Infer γ
How to calculate γ:
! 1
W2011:Q2 13
γ=
W2008:Q1
Subtract 0.6% per quarter to adjust for foreign inflation and long-run
growth (because they are not explicitly incorporated in the model)
to obtain the estimate:
γ ∈ [0.99, 1.022]
28
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
29
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
Model
small open economy
free capital mobility
2 periods
2 goods, traded and nontraded
P1T cT N N T ∗ T T ∗
1 + P1 c1 + P1 B1 = P1 Y1 + (1 + r0)P1 B0
Budget constraint in period 2:
P2T cT N N T T ∗
2 + P2 c2 = P2 Y2 + (1 + r1)P2 B1
31
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
cT N ∗ ∗
1 + p1 c1 + B1 = Y1 + (1 + r0)B0
cT
2 + p2 cN
2 = Y 2 + (1 + r 1 )B1
∗
T N cT
2 + p2cN2 =Y + Y2
c1 + p1 c1 + 1
1 + r1 1 + r1
32
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
U (cT ,
1 1 cN ) + U (cT , cN )
2 2
subject to the budget constraint:
T N cT
2 + p2cN2 Y2
c1 + p1 c1 + = Y1 +
1 + r1 1 + r1
U2(cT N
1 , c1 ) = p
1
U1(cT ,
1 1 cN)
33
How can we interpret this optimality condition. Suppose the house-
hold has 1 unit of traded good in period 1 and wants to decide to
either consume it now or to sell it and buy nontraded goods for it.
The marginal utility of consuming the one unit of traded good in pe-
riod 1 is: U1(cT ,
1 1cN ). If the household sells the unit of consumption
and buys nontradables for it, how many nontraded good does he
get? He obtains 1/p1 units of nontradables. How much additional
utility do these nontraded goods generate? They increase utility by
U2 (cT N
1 , c1 )/p1. At the optimum the additional utility of consuming
one more traded good must be the same as that of exchanging the
traded good for a nontraded one and then consuming the nontraded
good. Hence it must be the case that U2(cT ,
1 1cN )/p = U (cT , cN ),
1 1 1 1
which is the same as the above first-order condition.
U1(cT ,
1 1 cN) a cN
In this case the demand function for nontradables becomes:
cT
p1 = 1−a
1
a N
c1
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
Our question is how does a sudden stop affect the demand for non-
tradables. Figure xxx shows that a decline in cT
1 shifts the demand
schedule down and to the left. That is, for the same price agents
now demand less nontradables.
34
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
QN
t = F (ht),
where F is increasing and concave function. The latter assumption
is made to ensure that the marginal product of labor is decreasing,
that is, the production technology exhibits diminishing returns to
scale. Nominal profits of firms operating in the nontraded sector are
given by
PtN F (ht) − Wtht,
where Wt denotes the nominal hourly wage rate in period t. It will
be convenient to express profits in terms of tradables and thus we
divide nominal profits by PtT . This yields:
Wt
S
pt = 0 t .
F (ht)
We interpret this first-order condition as the demand for labor in the
nontraded sector. This schedule is a function of the real exchange
rate, pt , and the real wage in terms of tradables, Wt/St . We can also
interpret this condition as the supply schedule of nontraded goods
by recognizing that QN t is a monotonically increasing function of ht.
In what follows we will tend to use the latter interpretation more
often. Figure
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
W1 /S1
F 0 (h)
shows this supply schedule in the space (h, p) with a solid upward
sloping line. Why is the supply schedule upward sloping? All else
constant, higher prices increase the value of the marginal product
of labor but do not affect marginal cost and thus induce firms to
produce more goods.
36
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
38
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
To be continued in class.
39
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
40
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
41
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
W0 /E0
F 0 (h)
42
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
W0 /(P0∗M Ē)
F 0 (h)
W0 /(P1∗M Ē)
F 0 (h)
h
(S1 > S0)
43
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
p A2 (cT
0 , F (h))
A1 (cT
0 , F (h))
44
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
p A2 (cT
0 , F (h))
A1 (cT
0 , F (h))
1 , F (h))
A2 (cT
A1 (cT
1 , F (h))
h
(cT
1 < c T)
0
45
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
Wt ≥ γWt−1
ht ≤ h̄
(h̄ − ht) Wt − γWt−1 = 0
46
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
p A2 (cT
0 , F (h))
A1 (cT
0 , F (h))
1 , F (h))
A2 (cT
W0 /E0
A1 (cT
1 , F (h))
A F 0 (h)
p0
B
pPEG
W0 /E1
C F 0 (h)
pOPT
hPEG h̄ = hOPT h
cT
1 < c T (negative shock) and S > S (optimal devaluation)
0 1 0
47
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
%
10
4
5
0 2
2000 2008 2000 2008
%
10
10
5
0 8
2000 2008 2000 2008
10
20
5
0 15
2000 2008 2000 2008
10
7
5
0 6
2000 2008 2000 2008
15 18
%
10 16
5 14
0 12
2000 2008 2000 2008
48
International Macroeconomics, Chapter 11 Schmitt-Grohé, Uribe, Woodford
Bulgaria, not on the Euro, but fixed exchange rate since June 2004;
Cyprus, on the Euro since 2008, fixed exchange rate since 1999;
Estonia, on the Euro since 2011, fixed exchange rate since 1999;
Lithuania: not on the Euro, but fixed exchange rate with the Euro
since Feb 2002;
Latvia: not on the Euro, but fixed exchange rate with the euro since
Jan. 2005;
Slovenia: on the Euro since 2007, pegged to Euro since June 2004;
49
Slovakia: on the Euro since Jan 2009, prior to that Slovak koruna
was NOT fixed, instead it appreciated against the Euro from 45
Slovak koruna to 30.
Spain
Current Account / GDP Labor Cost Index, Nominal Unemployment Rate Cur
−3 110 22 −4
−4 20 −6
100
−5
18
Index, 2008 = 100
−8
−6 90
Percent
Percent
Percent
16
−7 −10
14
−8 80
−12
12
−9
70
10 −14
−10
−11 60 8 −16
2002 2004 2006 2008 2010 2002 2004 2006 2008 2010 2002 2004 2006 2008 2010 2002 2
Date Date Date