Working Paper: NBER ID: w2333
Authors: Willem H. Buiter
Abstract: The paper considers the analytical underpinnings of the scope for and limits of demand and supply management. After restating a general policy effectiveness result for New-Classical macroeconomic models, several non-Walrasan equilibrium models are considered. These use the efficiency wage hypothesis to generate equilibrium unemployment in the labor market and imperfect competition in the goods market to generate scope for demand management. Hysteresis models of the natural rate are also reviewed briefly. Tentative implications are drawn for the contributions of demand and supply management to the resolution of the European unemployment problem.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| demand-side policies (J68) | supply-side policies (E65) |
| higher wages (J39) | better worker productivity (J29) |
| better worker productivity (J29) | labor supply and demand (J20) |
| past unemployment rates (J64) | natural rate of unemployment (J64) |
| stabilization policies (E63) | gaps between actual and potential output (E23) |
| monetary policy (E52) | stabilization (E63) |