A Simple Framework for Stabilization Policy

Successful stabilization policy not only needs effective instruments and reliable indicators but also an usable theoretical framework. This paper looks for an as-simple-as-possible presentation that combines useful concepts for stabilization policy in a graphical presentation. As all variables used on the axes are stationary, this presentation even covers a growing economy. This framework is too simple to describe the time-paths of changes but it plots the quot;golden agequot; of short-run, medium-term and long-run equlibrium - the quot;never-never landquot; as a reference. So the state of an economy can be scetched graphically in a comparative static way