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The Right Combination of Demand and Supply Policies: The Case for a Two-Handed Approach

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  • 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.

Suggested Citation

  • Willem H. Buiter, 1987. "The Right Combination of Demand and Supply Policies: The Case for a Two-Handed Approach," NBER Working Papers 2333, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:2333
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    Cited by:

    1. Franz, Wolfgang, 1990. "Hysteresis in Economic Relationships: An Overview," Empirical Economics, Springer, vol. 15(2), pages 109-125.
    2. Marini, G. & Scaramozzino, P., 1989. "Monopolistic competition, expected inflation and contract length," Discussion Paper 1989-40, Tilburg University, Center for Economic Research.
    3. Jan Gottschalk & Ulrich Fritsche, 2005. "The New Keynesian Model and the Long-Run Vertical Phillips Curve: Does It Hold for Germany?," Discussion Papers of DIW Berlin 521, DIW Berlin, German Institute for Economic Research.
    4. Hoffmaister, Alexander W. & Roldos, Jorge E., 2001. "The Sources of Macroeconomic Fluctuations in Developing Countries: Brazil and Korea," Journal of Macroeconomics, Elsevier, vol. 23(2), pages 213-239, April.
    5. Bennett T. McCallum, 1988. "The Role of Demand Management in the Maintenance of Full Employment," NBER Working Papers 2520, National Bureau of Economic Research, Inc.
    6. Óscar Arce & Samuel Hurtado & Carlos Thomas, 2016. "Policy Spillovers and Synergies in a Monetary Union," International Journal of Central Banking, International Journal of Central Banking, vol. 12(3), pages 219-277, September.

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