Key Macroeconomic Policy Tools and Their Coordination in Systematic Economic Management
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Monetary Policy -- the effect of money growth on economic growth
"A New Measure of the Monetary "Velocity" (Stock/Flow) Ratio and Its Implications for Monetary Policy and Economic Forecasting
This 1977 Special Report #2 was part of IEA's effort to devise a more stable and reliable statistical measure of the monetary stock/flow ('velocity') ratio. It showed that (at the time) when this ratio was expressed in its most appropriate form, it had much greater stability and predictability than previously realized, and was thus, in combination with the money-growth formula and precisely-adjusted trend values of M1, a useful tool for both monetary policy and economic forecasting. Subsequent changes in Fed policy significantly damaged this "Money Demand Ratio" as a tool, but reversal of those changes could return it to its former value.
Fiscal Policy -- the effect of federal deficit/surplus on the economy.
A Twin Deficit Perspective on the Federal Budget.
Functionally, the present unified budget (and deficit) has two distinct components:
Policy Budget -- controlled by congressional tax and spending policies. To clarify that responsibility and its management, this should be a "stabilized-employment" ("full employment" -- 4% unemployment) version.
Economic Stabilization deficit or surplus -- the effect of the economy on the budget, and vice versa. In passive mode, this deficit component is traditionally called the "automatic stabilizer," but is actually controlled mainly by Federal Reserve-controlled unemployment rates. However, since this is a key component of the economy's National Credit Balance (between total Primary Financial Saving and total Primary Borrowing), it should be explicitly managed proactively by FASTA (below) to compensate for destabilizing swings in private borrowing and financial saving.
Monetary and Fiscal Policy Sunshine Act (summary, 1st legis. version 5/83; revised 5/98, 1/00) Fed is required to publish recommendations for a specific real GDP "soft landing" approach to full employment, and explain how it is trying to achieve this. Congress and the President are required to prepare a "standardized employment" (4% unemployment) Policy Budget as the main basis for budget discussion and legislation. Combined with FASTA credit stabilization policy, this provides for more systematic coordination of monetary and fiscal policy.
Inflation Causes (1980)
Initiating causes, inflation spiral, "tax-in-COLA syndrome," etc. (Detailed outline for several chapters in an unfinished book.)