session12 - Session 12 Policy Transmission Policy &...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
Session 12 Policy Transmission
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 Stabilising the economy Great Moderation Role of money Role of banks Securitisation
Background image of page 2
3 Keynesians vs Monetarists 0 1 2 3 4 5 6 7 3 4 5 6 7 Unemployment rate % US Phillips Curve 1960s Source: BLS 0 2 4 6 8 10 12 3 5 7 9 11 Unemployment rate % US Phillips Curve post-1970s
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
4 Inflation Expectations Source: Global Financial Data -4 0 4 8 12 16 55 60 65 70 75 80 85 90 95 00 05 10 % Nominal interest rate Real interest rate Nominal interest rate US 3mth T Bill rate Real interest rate Nominal interest rate less 5yr centred moving average of CPI inflation
Background image of page 4
5 Rational Expectations Forward-looking expectations No systematic errors Optimising behaviour Lucas critique
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
6 Policy Implications Expectations Phillips curve always vertical Economy always close to equilibrium Systematic policy ineffective Rules dominate discretion
Background image of page 6
7 Consensus Views In short run, shifts in aggregate demand affect output In medium run, output returns to natural level Monetary policy affects output only in short run; eventually monetary growth fully reflected in inflation Fiscal policy has positive demand effects in short run but little (perhaps perverse) impact further out Length of short-run? Policy rules or discretion?
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/03/2012 for the course ECONOMICS V31.9231 taught by Professor Greenleaf during the Spring '10 term at NYU.

Page1 / 30

session12 - Session 12 Policy Transmission Policy &...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online