A Simple Framework for Stabilization Policy

Abstract:     
Successful stabilization policy not only needs effective instruments and reliable indicators but also an usable theoretical framework. This paper looks for an as-simple-as-possible presentation that combines useful concepts for stabilization policy in a graphical presentation. As all variables used on the axes are stationary, this presentation even covers a growing economy. This framework is too simple to describe the time-paths of changes but it plots the "golden age" of short-run, medium-term and long-run equlibrium - the "never-never land" as a reference. So the state of an economy can be scetched graphically in a comparative static way.

Number of Pages in PDF File: 38

Keywords: Stabilization Policy, Germany, NAIRU

JEL Classification: E60, E63, N14, O52

working papers series