Targets, Tradeoffs, and Economic Policy: A Generalized Phillips Curve

1973 ◽  
Vol 1 (2) ◽  
pp. 67-83
Author(s):  
Shl Omo Maital
Keyword(s):  
Economic Growth ◽  
Economic Policy ◽  
Structural Change ◽  
Phillips Curve ◽  
Empirical Method ◽  
Balance Of Payments ◽  
Trade Off ◽  
Trade Offs ◽  
Short Run ◽  
Proper Design

Frank Bechling recently wrote that “the concentration on the trade-off between unemployment and inflation and the neglect of trade-offs between unemployment and other variables (balance of payments, economic growth, structural change, and income distribution) may lead to a suboptimal choice between inflation and unemployment.” Starting from this proposition, this paper uses a simple yet believable model to construct simulated short-run transformation curves for major economic objectives. One of these curves is the familiar Phillips curve relation between inflation and unemployment. Proper design of policy demands knowledge of subjective preferences, as well as objective tradeoffs, among economic goals. A tentative empirical method for investigating preferences is set out, along with some initial findings.

scholarly journals Inflation and Unemployment Trade-off: Is Phillips Curve True for African Developing Countries? Evidence from Sudan

2021 ◽  
Vol 4 (3) ◽  
Author(s):  
Omer Allagabo Omer Mustafa
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Phillips Curve ◽  
Economic Thought ◽  
Trade Off ◽  
Long Run ◽  
Short Run ◽  
Wage Inflation ◽  
The Relationship

The relationship between wage inflation and unemployment (Phillips Curve) is controversial in economic thought, and the controversy is centered around whether there is always a trade-off or not. If this relationship is negative it is called The short-run Fillips Curve. However, in the long run, this relationship may probable not exist. The matter of how inflation and unemployment influence economic growth, is debatably among macroeconomic policymakers. This study examines the behavior of the Phillips Curve in Sudan and its effect on economic growth.

Chapter II. The Home Economy

1980 ◽  
Vol 91 ◽  
pp. 27-42
Keyword(s):  
Economic Growth ◽  
Economic Policy ◽  
Oil Prices ◽  
Balance Of Payments ◽  
Oil Price ◽  
J Curve ◽  
Curve Effect ◽  
Short Run

Our general assessment of the prospects for the economy over the next two years has not changed greatly since we reported last November. There have been further sharp increases in oil prices, which lead us to raise the forecast increases of the OPEC average oil price to 60 per cent for 1980 and 20 per cent for 1981 (as against 36 per cent and 15 per cent respectively in November). And this year there has been the steel strike. These events, and other adjustments suggest that the various objectives of economic policy, such as economic growth and the reduction of inflation and unemployment will be missed by a somewhat larger margin. Ironically the balance of payments will be improved in the short run because the effect of the strengthening of the pound reduces the deficit initially (the inverse of the J curve effect which occurs when the pound falls).

The Quality of Kazakhstan’s Economic Policy and Balance of Payments

2008 ◽  
pp. 120-132
Author(s):  
K. Arystanbekov
Keyword(s):  
Economic Growth ◽  
Economic Policy ◽  
Economic Development ◽  
Balance Of Payments ◽  
Foreign Investors ◽  
Negative Balance ◽  
Macroeconomic Efficiency

Kazakhstan’s economic policy in 1996-2007, its character and the degree of responsibility, the correlation between economic development and balance of current accounts are considered in the article. Special attention is paid to the analysis of their macroeconomic efficiency. It is concluded that in conditions of high rates of economic growth in Kazahkstan in 2000-2007 the net profits of foreign investors are 10-11% of GDP every year. The tendency of negative balance of current accounts in favor of foreign investors is also analyzed.

Pakistan's Export Possibilities

1973 ◽  
Vol 12 (1) ◽  
pp. 1-30
Author(s):  
Syed Nawab Haider Naqvi
Keyword(s):  
Economic Growth ◽  
Foreign Aid ◽  
Policy Maker ◽  
Time Horizon ◽  
Price Level ◽  
Balance Of Payments ◽  
Domestic Saving ◽  
Trade Offs ◽  
High Level

The recent uncertainties about aid flows have underscored the need for achieving an early independence from foreign aid. The Perspective Plan (1,965-85) had envisaged the termination of Pakistan's dependence on foreign aid by 1985. However, in the context of West Pakistan alone the time horizon can now be advanced by several years with considerable confidence in its economy to pull the trick. The difficulties of achieving independence from foreign aid can be seen by reference to the fact that aid flows make it possible for the policy-maker to pursue such ostensibly incompatible objectives as a balance in international payments (i.e., foreign aid finances the balance of payments), higher rates of economic growth (Lei, it pulls up domestic saving and investment levels), a high level of employment (i.e., it keeps the industries working at a fuller capacity than would otherwise be the case), and a reasonably stable price level (i.e., it lets a higher level of imports than would otherwise be possible). Without aid, then a simultaneous attainment of all these objectives at the former higher levels together with the balance in foreign payments may become well-nigh impos¬sible. Choices are, therefore, inevitable not for definite places in the hierarchy of values, but rather for occasional "trade-offs". That is to say, we will have to" choose how much to sacrifice for the attainment of one goal for the sake of somewhat better realization of another.

scholarly journals Stabilization Policies and Technological Shocks: Towards a Sustainable Economic Growth Path

2019 ◽  
Vol 11 (1) ◽  
pp. 205 ◽  
Author(s):  
Anelí Bongers ◽  
Carmen Díaz-Roldán
Keyword(s):  
Economic Growth ◽  
Economic Policy ◽  
Policy Making ◽  
Sustainable Growth ◽  
Economic Policies ◽  
Long Run ◽  
Short Run ◽  
Stabilization Policies ◽  
Development Goals ◽  
Sustainable Economic Growth

The purpose of this paper is to explore the extent to which traditional economic policies can be oriented by sound practices. It is becoming widely accepted that sustainable economic growth (and not only economic growth) is the final target of economic policies, but some economic policies are applied just looking to the short-run without taking in account the long-run perspective. Our aim is to show how a sustainable economic policy-making would be possible, making compatible the stabilization of the economy in the short-run with a sustainable economic growth in the long-run. We confront the design of economic policies with the 17 goals of the 2030 Agenda. We argue that all sustainable development goals can be attained by the design and implementation of sustainable economic policies. Finally, to illustrate this point, we will conduct a simulation exercise to show under which combinations of demand policies technological shocks would promote a path of sustainable growth. Our results will provide a reference framework for a sustainable economic policy-making.

scholarly journals The Concept of Macro-Economic Policy Based on the Compromise between Inflation and Growth

2021 ◽  
Vol 18 (4) ◽  
pp. 485-496
Author(s):  
V.I. Maevsky ◽  
◽  
A.A. Rubinstein ◽  
◽  
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Economic Policy ◽  
Open Economy ◽  
Phillips Curve ◽  
Small Open Economy ◽  
Price Volatility ◽  
Econometric Methods ◽  
Theoretical Approaches

The article describes a concept of a long-term macro-economic policy based on a compromise between economic growth and inflation that accompanies this growth. This concept differs from the existing theoretical approaches supported by monetary authorities in that it does not rely on the notion of Russia as a small open economy and it does not focus on price volatility as the number one problem in the long-term perspective. The theoretical framework usually used to address the relationship between economic growth and inflation is the Phillips curve and its modifications. In our study, this problem is connected to the phenomenon of non-neutrality of money in the long term. The analysis uses the simulation model of the shifting mode of reproduction (SMR model) and econometric methods. It is shown that a compromise between economic growth and inflation can be achieved if the long-term monetary policy results in the approximately equal rates of real GDP and inflation. Such monetary policy is possible to realize provided that some important macro-economic conditions are fulfilled, for example, the rouble undervaluation coefficient is reduced, the debt-to-gross-domestic- product ratio is increased, the ratio of international (foreign exchange) reserves to GDP is decreased, and the transition to a fiscal deficit policy is implemented. In other words, a systemic approach is required. This is not an easy way but it will ensure a growth in GDP rates and lower inflation.

scholarly journals The Political Implications of COVID-19

2020 ◽  
Author(s):  
Daphne Halikiopoulou
Keyword(s):  
Health Management ◽  
Health Economy ◽  
The Political ◽  
Trade Off ◽  
The Poor ◽  
Trade Offs ◽  
Long Run ◽  
Political Implications ◽  
Short Run ◽  
Emergency Measures

This chapter briefly examines the political implications of COVID-19, focusing on the potential constraints and opportunities it poses for populism. Some initial comparative observations suggest the following patterns. First, populists in opposition are likely to be weakened electorally in the short-run, as voters support non-populists on the basis of valence voting. Second, this may not apply to populists in power, who may use emergency measures for democratic backsliding. Third, in the long-run, a potential economic crisis as a result of the pandemic may benefit populist parties, especially those in opposition as discontent voters may punish those in government for the poor managing of the health/economy trade-off. In sum, what will determine the direction of future political developments is the extent to which governments can balance the trade-offs involved in the Covid-19 crisis, including effective health management versus economic growth and individual freedoms versus collective security.

Inflation-Unemployment Trade-Offs In ASEAN-10

2020 ◽  
Vol 9 (2) ◽  
pp. 241-256
Author(s):  
Nurul Lisani ◽  
Raja Masbar ◽  
Vivi Silvia
Keyword(s):  
Unemployment Rate ◽  
Inflation Targeting ◽  
Phillips Curve ◽  
Panel Cointegration ◽  
Vector Error Correction ◽  
Trade Offs ◽  
Long Run ◽  
Panel Cointegration Test ◽  
Short Run ◽  
Variance Decompositions

This study empirically explores the nature of inflation-unemployment dynamic causal relationships both in the short and long-run in the ASEAN-10 over the 1989-2018 period. Based on the panel cointegration test, the study documented a long-run equilibrium between inflation and unemployment. Using the Vector Error Correction Model (VECM) analysis, the study found an insignificant inflation-unemployment relationship in the short-run. However, in the long-run, inflation is found to affect the unemployment rate positively. Our results from the Variance Decompositions (VDCs) analysis also supported these findings, where the unemployment responded at the more significant percentage to shocks in inflation compared to the response of inflation to shocks in unemployment. These findings only supported the relevance of the Phillips curve theory in the long-run. Overall, these findings imply that although inflation targeting policy is not relevant to the short-run, it becomes crucial and effective to reduce the unemployment rate in ASEAN-10 in the long-run.JEL Classifications: E52, E58, J64 How to Cite:Lisani, N., Masbar, R., & Silvia, V. (2020). Inflation-Unemployment Trade-Offs In Asean-10. Signifikan: Jurnal Ilmu Ekonomi, 9(2), 241-256. https://doi.org/10.15408/sjie.v9i2.16346.

Policy Trade-Offs in the NIESR Model: Exercises Using Optimal Control

1983 ◽  
Vol 105 ◽  
pp. 36-45 ◽  
Author(s):  
Simon Brooks ◽  
Brian Henry ◽  
Elias Karakitsos
Keyword(s):  
Optimal Control ◽  
Phillips Curve ◽  
Aggregate Demand ◽  
Empirical Finding ◽  
Inflation Expectations ◽  
Natural Rate ◽  
Systematic Analysis ◽  
Trade Off ◽  
Trade Offs ◽  
Wage Inflation

This article investigates the consequences of alternative fiscal packages by applying optimal control techniques to the National Institute econometric model. Britton (1983) provides an assessment of alternative packages by using ready reckoners derived from simulations of the NIESR model reported in Brooks and Henry (1983). The present investigation may be seen as a more systematic analysis, using the techniques of optimal control. Such an assessment inevitably concerns the measurement of trade-offs between the major objectives of government policy, an issue which has generated much controversy over the last decade. Early interpretations of the Phillips Curve for example tended to regard the empirical finding of an inverse relation between inflation and unemployment as providing a menu for policy choice. According to this interpretation, aggregate demand policy could be used to select the best combination of inflation and unemployment rates available subject to the constraint set by the Phillips Curve. Since that time, parallel developments in the theory of wage inflation, expectations formation, and macroeconomic policy have produced considerable scepticism about the existence of this trade-off, questioning whether the implied choice between alternative combinations of inflation and unemployment is open to governments using aggregate demand policy. Much of this scepticism was coincident with growing dissatisfaction with the Phillips Curve as a statistical representation of wage inflation, but we will not be directly concerned with this aspect of the argument here. Two points however do arise from this debate which are of direct relevance to the subject matter of this article. The first is that a trade-off between inflation and unemployment may exist even if the labour market is not characterised by a Phillips Curve. The second is the central role played by natural rate concepts in the debate on the effectiveness of aggregate demand policy.

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