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2008-10-30 11:05:41
bennisboy
Member
+829|7096|Poundland
Well I dont know how many people will be able to answer this (if any) but I'm seriously stumped with one of my coursework questions for uni.
Basically, for thequestion before, I got a graph showing that the difference between the inter bank lending rate (LIBOR) and the bank of england interest rate has been widening. I need to use that info to answer this:

What does the IS-LM-FE model predict for the level of output and exchange rate resulting from the changes in the inter-bank spread shown in your data? In what ways does the IS-LM-FE model provide a limited view of the monetary transmission mechanism resulting from a change in the inter-bank rate?

All I can think of is a resounding "Wat?", so feel free to post that. I need to get 180 words for it, I'm struggling for a single one
2008-10-30 11:18:09
Jebus
Looking for my Scooper
+218|6214|Belgium
Wat x180

Seriously, wtf O.o
2008-10-30 11:19:43
bennisboy
Member
+829|7096|Poundland
exactly, n this isnt even the hardest stuff I'm doin this year!
2008-10-30 11:30:55
Jebus
Looking for my Scooper
+218|6214|Belgium
I think it would be a good idea to show the graph they've given you, might help people understand/explain it better.
2008-10-30 11:35:17
Jenspm
penis
+1,716|7182|St. Andrews / Oslo

So basicly, it's asking what the IS-LM-FE model predicts will be the new Exchange rate, and thus the level of output? Wouldn't that be as easy as finding the point where IS and LM meet? Or have I misunderstood the question? (complicated english is complicated).
https://static.bf2s.com/files/user/26774/flickricon.png https://twitter.com/phoenix/favicon.ico
2008-10-30 11:35:30
wensleydale8
Member
+81|7219|LEEDS!!!!!, Yorkshire
Are AD ans AS curves involved in your explanation if not I think you just need to show how the IS movement affects GDp and exchange rates as a result.

Last edited by wensleydale8 (2008-10-30 11:38:07)

Dear God please let my karma one day reach 100, whether it be tomorrow or 1000 years in the future i want it to happen.
2008-10-30 11:48:05
bennisboy
Member
+829|7096|Poundland

Jenspm wrote:

So basicly, it's asking what the IS-LM-FE model predicts will be the new Exchange rate, and thus the level of output? Wouldn't that be as easy as finding the point where IS and LM meet? Or have I misunderstood the question? (complicated english is complicated).
Well, you need to explain how the output and exchange rates would change. I've got it pretty much down.

Basically there is a lack of confidence due to the high LIBOR rate, this leads to a capital outflow. less demand for pounds as speculators sell them. exchange rate falls.

then that the high LIBOR rates would cause banks to charge their customers higher rates to maintain profit margins. Leading to less consumer spending and business investment, so output falls.

obviously thats shortened

You dont actually need to show IS-LM-FE, jus say what it predicts.

@Jenspm, we have no way of finding out the current account schedule or the capital account schedule, or the money supply and demand (LM) or deriving the IS curve, so its not really to do with the intersection, its more to do with theory than quantative economics

@wensley, no AS AD isnt involved, altho changes in that can cause shifts/pivots in the IS curve

 

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