这个作业是用Matlab完成货币金融模型
ECON6008: International Money & Finance, Semester 2 2020
The Questions
1. Solve the model described above using Dynare. Obtain the impulse response for 10
periods to a one-time 1% shock to
(a) money supply or the domestic interest-rate shock (“m;t);
(b) preference (“g;t);
(c) labor supply (s;t);
(d) foreign output (“y
;t).
Analyze (i.e. explain the dynamics) and plot the e ect of each of these shocks to
domestic output (ybt), consumption (bct), interest rate (bit), in
ation (bt), domestic-currency
nominal depreciation (eb
c
t
), and the “shocked” variable (e.g. if it’s a foreign output shock,
plot yb
t
). Plot these six variables in one 3×2 gure or plot (with 3 rows and 2
columns). Relate your analysis to what you have learned in the rst half of the course
(the qualitative AA-DD model). For the money supply or the domestic interest-rate shock,
do you observe an overshooting of the nominal exchange rate?
[Extra points: plot the evolution of the level of nominal exchange rate and the current
account in a separate gure and explain the dynamics.]
2. COVID-19 pandemic and monetary and exchange-rate policies.
Let’s analyze the economic impact of the COVID-19 pandemic using this model, with
several di erent assumptions on the central bank’s monetary and exchange-rate policies.
Here, the COVID-19 pandemic “shocks” are proxied by a combination of negative labor
supply and negative preference shocks. The preference (or consumer-spending) shock in
the model is a type of demand shock that in
uences household intertemporal consumptionsaving decisions. A negative preference shock thus serves as a proxy for a reduction in
aggregate demand during the pandemic, e.g. due to lost labor income or an increase in
household income uncertainty which leads to a precautionary saving behaviour. A negative
labor supply shock captures an aggregate supply reduction due to supply-chain disruptions
and large-scale social and economic restrictions (lockdowns).
In particular, assume that the economy starts at period 0 (2019.Q4) at the steady
state. Assume that the pandemic “shocks” occur for 4 periods or quarters, from periods
1-4 (2020.Q1-2020.Q4) with the following magnitudes:
Period
(Quarter)
1
(2020.Q1)
2
(2020.Q2)
3
(2020.Q3)
4
(2020.Q4)
Labor supply (s;t) 5% 7% 3% 2%
Preference (“g;t) 3% 3% 2%
There are positive labor supply and preference shocks in period 4, perhaps in response to
the expectations that an e ective COVID-19 vaccine is imminent and about to be approved
and rolled out to the public.
(a) Analyze the e ect of these pandemic shocks under the current policy rule with i =
0:75, = 1:9, y = 0:08, y = 0:67, and e = 0. Plot the responses of ybt
, bct
, bit
,
bt
, eb
c
t
in one (3×2) gure. Explain their dynamics. In another (2×1) gure, plot the
evolution of exogenous labor supply variable ^”s;t and consumer preference variable gbt
.
Is this combination of shocks a realistic representation of the COVID-19 pandemic
shocks? Why?
(b) In the model above, we assume a fully-
exible (
oating) exchange rate regime. Suppose that the central bank also directly intervenes in the foreign exchange market, i.e.
it’s operating under a managed
oating exchange rate. This policy can be analyzed
within our model by assuming that
e = 0:65 > 0
The rest of policy rule coecients are unchanged. Analyze the e ect of the pandemic
shocks under this new assumption, in comparison to the e ect in part (a). Plot
the responses of ybt
, bct
, bit
, bt
, eb
c
t
in one (3×2) gure. Is this policy more e ective in
terms of mitigating the e ect of the pandemic shocks on ybt
, bt
, and eb
c
t
? Explain.
(c) Now assume that the central bank is operating under a xed exchange-rate regime.
Speci cally, the monetary policy rule in equation (11) is replaced with the following
policy rule:
eb
c
t = 0
This policy rule e ectively (and credibly) xes the nominal exchange rate at a speci-
ed level. Redo questions 2(a). Your answer and analysis should be in comparison
to the
oating exchange-rate regime (both when e = 0 and e = 0:65).
[Notes: (i) Dynare does not plot the impulse response of a variable if that variable is
always constant (zero deviation from the steady state), (ii) since the foreign-debt holding,
bat, enters the UIP condition in equation (8), you will generally not nd bit = bi
t under the
xed-exchange rate regime, unless = 0)].
