5 monetaristic theories and the phillips curve n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
5. Monetaristic Theories and the Phillips Curve PowerPoint Presentation
Download Presentation
5. Monetaristic Theories and the Phillips Curve

Loading in 2 Seconds...

play fullscreen
1 / 15

5. Monetaristic Theories and the Phillips Curve - PowerPoint PPT Presentation


  • 116 Views
  • Uploaded on

5. Monetaristic Theories and the Phillips Curve. Exogenous shocks (mainly from Keynesian policy) Monetary amplifiers (v) Rules instead of discretion Flourished in 1970s and 1980s Today merged with new classical and Keynesian models.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about '5. Monetaristic Theories and the Phillips Curve' - molly


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
5 monetaristic theories and the phillips curve
5. Monetaristic Theories and the Phillips Curve
  • Exogenous shocks (mainly from Keynesian policy)
  • Monetary amplifiers (v)
  • Rules instead of discretion
  • Flourished in 1970s and 1980s
  • Today merged with new classical and Keynesian models

Konjunktur und Beschäftigung

U. van Suntum KuB 5.2 1

U van Suntum, Vorlesung KuB 1

slide2

A simple model following Friedman

  • Milton Friedman
  • 1912 - 2006
  • Nobelprice 1976

Konjunktur und Beschäftigung

U. van Suntum KuB 5.2 2

U van Suntum, Vorlesung KuB 2

numerical example
Numerical example

Shock in t1: M1 = M2...= Mn = 808

...

Konjunktur und Beschäftigung

U. van Suntum KuB 5.2 3

U van Suntum, Vorlesung KuB 3

slide4

Graphical exposition of Friedman example

Ynom (left hand scale)

Price level p (right hand scale)

P

Konjunktur und Beschäftigung

U. van Suntum KuB 5.2 4

U van Suntum, Vorlesung KuB 4

slide5

Graphical exposition of Friedman example (II)

Inflation rate (righthandscale)

Velocityofmoneycirculation

v (lefthandscale)

Konjunktur und Beschäftigung

U. van Suntum KuB 5.2 5

U van Suntum, Vorlesung KuB 5

slide6

Criticism

  • real income fixed (missing equation)
  • constant Yreal empirically false
  • far too simple
  • but makes Hawtrey-effect more explicit
  • can serve as basis for more sophisticated models

Konjunktur und Beschäftigung

U. van Suntum KuB 5.2 6

U van Suntum, Vorlesung KuB 6

the model by laidler 1973
The model by Laidler (1973)

Konjunktur und Beschäftigung

U. van Suntum KuB 5.2 7

U van Suntum, Vorlesung KuB 7

numerical example a 0 9 b 0 4 y max 100 cu 80
Numerical example(a = 0,9 b = 0,4 Ymax = 100 CU* = 80%)

Monetary shock in t =1

P

CU

Konjunktur und Beschäftigung

U. van Suntum KuB 5.2 8

U van Suntum, Vorlesung KuB 8

slide9

Graficalexpositionoftheexample

(curvesaresmoothed)

..\..\Makro\Vorlesung Makro WS 2009\monetaristisches Konj-Modell.xls

Yreal (left hand scale)

Price level p (right hand scale)

P

Konjunktur und Beschäftigung

U. van Suntum KuB 5.2 9

U van Suntum, Vorlesung KuB 9

slide10

Graficalexpositionoftheexample (II)

(curvesaresmoothed)

Growth of Yreal

Inflation rate

Konjunktur und Beschäftigung

U. van Suntum KuB 5.2 10

U van Suntum, Vorlesung KuB 10

slide11

Graficalexpositionoftheexample (III)

(curves not smoothed)

Capacity utilization CU

Velocity of money circulation v

Konjunktur und Beschäftigung

U. van Suntum KuB 5.2 11

U van Suntum, Vorlesung KuB 11

slide12

Phillipscurve in Laidler-model (I)

Inflation rate

1 - CU

Konjunktur und Beschäftigung

U. van Suntum KuB 5.2 12

U van Suntum, Vorlesung KuB 12

slide13

Phillipscurve in Laidler-model (II)

Inflation rate

1 - CU

Konjunktur und Beschäftigung

U. van Suntum KuB 5.2 13

U van Suntum, Vorlesung KuB 13

criticism of monetaristic models
Strengths:

Can explain short term impact of monetary policy

Damped fluctuations in line with reality

Can explain the short term Phillipscurve

Clear policy recommendations

Weaknesses:

One sided

Quantity of money exogenous?

Missing equation in Friedman´s model

Mechanistic behavior of P und Yreal in Laidler`s model

Criticism of monetaristic models

Konjunktur und Beschäftigung

U. van Suntum KuB 5.2 14

U van Suntum, Vorlesung KuB 14

lerning goals questions
Lerning goals/questions
  • What are the key cycle drivers in monetaristic models?
  • How do these models explain the turning points?
  • How do the short run effects differ from the long run results?
  • How is the Phillips curve explained by monetaristic models?
  • What are the main policy recommendations from monetaristic models?

Konjunktur und Beschäftigung

U van Suntum, Vorlesung KuB 15