【文章內(nèi)容簡(jiǎn)介】 ion of greater autonomy ?Policymakers may have to consider the effect of moary policies on exchange rate also. ?Floating rates may lead to a quicker adjustment of price levels and hence reduces the effect of moary policy on real economic variables. 48 Moary policy Exchange rate Foreign countries Domestic economy 49 Floating or fixed? Exchange Rate Experience Between the Oil Shock 19731980 50 The First Oil Shock and Its Effects, 19731975 ?Background ?March 1973: the industrialized countries’ exchange rate is allowed to float ?Fall 1972: Committee of Twenty to design a new fixed rate system free of asymmetry ?July 1974: ―Outline of Reform‖ 51 Energy prices and the 197475 recession ? The war between Israel and Arab countries ?Before October 1973: $3 per barrel ?October 1973: war between Israel and the Arab countries was broken ?Israel was supported by the . and the Netherlands ?To protest against this support, Arab members of OPEC (Organization of Petroleum Exporting Countries) imposed an embargo on oil shipments to these two countries. 52 Effect of the war on oil prices ?Buyers stock up inventories ?OPEC raised prices ?March 1974: $12 per barrel ?. oil shock 53 Effect of the oil shock ?The oil shock raised the energy prices paid by consumers and the operating costs of energyusing firms ?and also fed into the prices of nonenergy petroleum products, such as plastics. 54 Effect of the oil shock ?Like a large tax on oil importers imposed by the oil producers of OPEC and also ?like an increase in consumer and business taxes ?Consumption and investment slowed down everywhere ?The world was thrown into recession 55 Effect on current account ?CA of nonoil exporting countries worsened ?CA of oil exporters improved (Table 222) 56 Current Account Balances, 19731997 (billions of dollars), (KO, Table 222) 1501005005010015073 75 77 79 81 83 85 87 89 91 93 95 97Major oil exporters Other developing Insustrial57 Effect on inflation ?Oil shock raised prices of petroleum products and the costs of energyusing industries ?caused price level to jump upward ?Inflation expectation ?drove up contract wages (despite already high unemployment rate) ?speculators built up stocks of those modities whose prices are expected to rise 58 Other factors causing inflation ?1972 on: ?poor harvest in the . and the Soviet Union ?shortage of sugar and cocoa ?disappearance of the Peruvian anchovies from their customary feeding grounds 59 Moary policies ?After 1973: The move to floating rate allows moary policy autonomy ?Industrialized countries adopted a more restrictive moary and fiscal policies aimed at restraining the accelerating inflation ?deepened the recession 60 Moary growth Coun try 1972 1973 1974German y % % . % % %61 Stagflation: 197475 ?Output stagnated ?inflation remained high 62 Regaining Internal and External Balance ?As recession deepened over 1974 and early 1975, most governments (in particular, the industrialized) shifted to expansionary fiscal and moary policies. ?Second half of 1975: ?strong output recovery. ?CA became surplus 63 Is floating good? ?Yes! Floating allows autonomy in moary policy and help to regain internal and external balance 64 Nonoildeveloping countries ?Did not (and cannot) cut their spending as sharply as industrial countries ?GDP growth did not bee negative in 1975 ?Developing countries financed their oil deficits in part by borrowing funds that the OPEC countries had deposited in the industrial countries’ financial centers. 65 Revising IMF’s Charter ?January, 1976: ?revised the fourth IMF Article of Agreement, which covered exchange rate agreement ?implicitly endorse floating rates by freeing each member country to choose any exchange rate system it preferred. 66 Weak 19761979 ? 1975: recovery due to expansionary moary and fiscal policy ?unemployment rate = % ? 1976: recovery slowed down and unemployment remained high ? 1978: ?unemployment rate = % ?reignited inflation ?. current account deficit 67 Depreciation of . dollar ? Germany and Japan from 19751978 ?feared of inflation and would not use very expansionary policies. ?Low inflation rate relative to the . ?Hence depreciation of . dollar (PPP?) (Figure 193) 68 0501001502001975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997Nominal and Real Effective Dollar Exchange Rate Indexes 19751998 69 Depreciation of . dollar ? July 1978, Bonn economic summit ?West Germany and Japan joined the . to use relatively expansionary policies. 70 Paul Volcker factor: 1979 ?International investors lost confidence in . dollar in view of the widening gap between . and foreign inflation rates. ?Weakening dollar fueled . inflation rate by raising import prices ?To restore confidence, Carter appointed Paul A. Volcker 71 The Volcker factor ?October 1979, Volcker announced a tightening of . moary policy and the adoption by the Fed of more stringent procedures for controlling money supply growth 72 Does floating give us autonomy in moary policy ?Not really. Governments could not be indifferent to the behavior of exchange rates. ?surrendered some of their policy autonomy in other areas to prevent exchange rate movements they viewed as harmful to their economies 73 Moary policy Exchange rate Foreign countries Domestic economy 74 The second oil shock ?1979: Shah of Iran fell ?disrupt oil exports from Iran ?oil prices rose ?1980: $32 pe