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The Diamond of Macroeconomic Equilibria and Non-Inflationary Expansion
Citation
McDonald, IM and Sibly, HA, The Diamond of Macroeconomic Equilibria and Non-Inflationary Expansion, Metroeconomica, 56, (3) pp. 393-409. ISSN 0026-1386 (2005) [Refereed Article]
DOI: doi:10.1111/j.1467-999X.2005.00222.x
Abstract
This paper combines the microeconomic foundations of earlier models of a range of equilibrium rates of employment to generate a model with a diamond of equilibria. Analysis of the diamond model shows that for a depressed economy an expansionary aggregate demand policy can, without violating rational expectations of inflation, generate a central proposition of Keynesian economicsâ€"a non-inflationary expansion (NIE), that is a permanent increase in employment without increasing inflation. The microeconomic foundations of the model draw on ideas of customer markets, reference dependence and loss aversion. It is also shown that the possibility of achieving an NIE is enhanced if a macro price policy, such as incomes policy or inflation targeting, accompanies the expansion in aggregate demand. © 2017 Wiley. All rights reserved.
Item Details
Item Type: | Refereed Article |
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Research Division: | Economics |
Research Group: | Economic theory |
Research Field: | Macroeconomic theory |
Objective Division: | Economic Framework |
Objective Group: | Macroeconomics |
Objective Field: | Macroeconomics not elsewhere classified |
UTAS Author: | Sibly, HA (Dr Hugh Sibly) |
ID Code: | 35395 |
Year Published: | 2005 |
Deposited By: | Economics and Finance |
Deposited On: | 2005-08-01 |
Last Modified: | 2006-05-05 |
Downloads: | 0 |
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