Chapter 7 Macroeconomic Policies汇总.docx
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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?
•
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