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Can there be a 'golden triangle' of internal equilibrium?

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  • Skare, Marinko

Abstract

The necessity of maintaining a balance between growth, employment and prices has always been in focus of economic policy debate. This piece of research is our modest contribution in the same direction. We explore the possibility of a simultaneous equilibrium of the mentioned three targets of national economic policy. Our empirical analysis show that a triangular equilibrium (what we call 'golden triangle') exists and that the governments can follow a policy of close monitoring the behaviour of the three variables and support the 'optimum' rate through an active intervention. We have looked for the quantitative relations that exist between the key economic variables and economic policy goals. It is our contention that a macroeconomic policy mechanism based on the golden triangle rule can help the governments to promote a long-term equilibrium growth and avoid possible close encounters with business cycles.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 32 (2010)
Issue (Month): 4 (July)
Pages: 562-573

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Handle: RePEc:eee:jpolmo:v:32:y::i:4:p:562-573

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Web page: http://www.elsevier.com/locate/inca/505735

Related research

Keywords: Growth Inflation Golden triangle rule Unemployment Internal equilibrium;

References

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  1. Jeffrey R. Campbell & Jonas D.M. Fisher, 1998. "Aggregate employment fluctuations with microeconomic asymmetries," Working Paper Series, Macroeconomic Issues WP-96-17, Federal Reserve Bank of Chicago.
  2. Mark Setterfield & Kristen Leblond, 2003. "The phillips curve and US macroeconomic performance during the 1990s," International Review of Applied Economics, Taylor & Francis Journals, vol. 17(4), pages 361-376.
  3. Campbell, John Y & Mankiw, N Gregory, 1987. "Are Output Fluctuations Transitory?," The Quarterly Journal of Economics, MIT Press, vol. 102(4), pages 857-80, November.
  4. Prachowny, Martin F J, 1993. "Okun's Law: Theoretical Foundations and Revised Estimates," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 331-36, May.
  5. Nicholas Apergis & Anthony Rezitis, 2003. "An examination of Okun's law: evidence from regional areas in Greece," Applied Economics, Taylor & Francis Journals, vol. 35(10), pages 1147-1151.
  6. Lee, Jim, 2000. "The Robustness of Okun's Law: Evidence from OECD Countries," Journal of Macroeconomics, Elsevier, vol. 22(2), pages 331-356, April.
  7. Paul A. Samuelson, 2008. "Thoughts about the Phillips curve," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 53.
  8. Adams, Charles & Coe, David T., 1989. "A Systems Approach to Estimating the Natural Rate of Unemployment and Potential Output for the United States," MPRA Paper 8622, University Library of Munich, Germany.
  9. Kaufman, Roger T., 1988. "An international comparison of Okun's laws," Journal of Comparative Economics, Elsevier, vol. 12(2), pages 182-203, June.
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