The Role of Demand Management in the Maintenance of Full Employment

Bennett McCallum

No 2520, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper begins by identifying nominal price stickiness as the logical basis for the Keynesian or activist point of view concerning demand management policy. It then characterizes two alternative approaches to policy analysis that have been adopted by adherents of the Keynesian position, the "disequilibrium" and "Phillips curve" approaches, The former is inherently defective, it is argued, while the latter has yet to be satisfactorily implemented. Indeed, implementation that is not open to Lucas-critique weaknesses is not in sight. In response to the implied dilemma for policy makers, the paper describes a rule for the conduct of monetary policy that relies upon minimal understanding of price-adjustment dynamics and which should be robust to regulatory and technological change In the economy's financial and payments institutions. A bit of evidence is presented to suggest that the rule would, if adopted, lead to approximately zero inflation (on average) and to output/employment fluctuations that are small by historical standards.. Possible criticisms relating to recent European experience and to recent theoretical developments are considered.

Date: 1988-02
Note: EFG ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published as McCallum, Bennett T. "The Role of Demand Management in the Maintenance of Full Employment." from Keynes and Economic Policy, ed. by Walter Eltis and Peter Sinclair, Macmillan: London, 1989.

Downloads: (external link)
http://www.nber.org/papers/w2520.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:2520

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w2520

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().