The Use of Econometric Research for the Purpose of Economic Policy (An Example)

The object of this chapter is:

to estimate, for the Netherlands, the influence of wage, tax, and price policy (including devaluation) and an increase in productivity on the balance of payments and employment;

to give some examples of “inefficient regulators” in economic policy; and

to illustrate a number of questions of methodology in economic analysis, viz.:

the question when the results of economic analysis can be proved verbally;

what simplifications in the analysis are possible by the introduction of new (“composed” or “derived”) variables;

to indicate the role of “directives” and “instruments” of economic policy in the analysis, and

to illustrate the role of “boundary conditions” in modern economic analysis.