Internal Balance and Price Stability

Abstract

In Chapters 6–12 each of the four objectives of macro-economic policy dealt with in this book was considered in isolation, though the high degree of interdependence between the objectives was explicitly recognised. Thus in Chapter 6 we discussed the measures by which the authorities can pursue the internal balance objective without considering the significance of these measures for the remaining objectives, even though, as made clear in Chapters 7–10, they are highly relevant to external balance and price stability as well. Again, in discussing anti-inflation policy in Chapter 10 the question whether the attainment of the price-stability objective would help or hinder the attainment of the growth objective was not raised, though it has been much debated at various levels in recent years. This ‘one-at-a time’ approach was adopted partly to simplify the exposition and also because it seemed clear to us that no proper discussion of the inter relationship between objectives would be possible until each objective had been considered in detail by itself. However that may be, we shall now attempt to restore the balance by taking up the question of interdependence of objectives in the three remaining chapters of the book. In this chapter we shall deal with the interrelationship between the objectives of internal balance and price stability, in the next with the interrelationship between internal and external balance, and in the final chapter with the interrelationship between the price-stability and growth objectives.