Conjunctuurpolitiek en Internationale Verhoudingen
De Economist , Volume 86 - Issue 1 p. 81- 107
Some problems of business cycle policy are considered with the aid of a simplified model of dutch business life. This model is described by 21 equations, the meaning of which has been discussed elsewhere. In the present article special attention is given to the influence of a given cyclic movement of foreign prices and demand on profits and employment in the Netherlands, under different régimes of economic policy. Chart 1 shows the movements under existing conditions, chart 2 those occurring under a régime of compensating public investment, chart 3 those under a régime of compensating exchange rates and chart 4 gives the consequences of a combination of these two forms of business cycle policy. In a somewhat more general way the question is treated which among a greater number of possibilities would constitute the best policy and it is argued that a combination of compensating exchange rates, compensating public investment, stabilisation of consumption outlay and reduction of speculation opportunities would show the best results. Finally the question of directives as distinguished from that of the instrument of business cycle policy is discussed somewhat nearer. The author is of the opinion that a useful directive for the different forms of business cycle policy discussed is to be seen in the tension barometers given by the Central Bureau of Statistics in De Nederlandsche Conjunctuur (August 1936, p. 16–17).