This paper proposes a framework built on the simple Keynesian Cross but recommends a non-Keynesian fiscal monetary policy mix. A fiscal policy conditions index and a monetary conditions index are proposed, to be compared to the full employment compatible fiscal and monetary conditions. Fiscal policy should be inert throughout the different phases of the business cycle while monetary policy should adjust to the changing conditions in order to maintain full employment without overheating. The slightly different policy considerations for bigger and for smaller economies are discussed.
Ho, L. S. (2003). A new (and old) macroeconomic policy framework (CPPS Working Paper Series No.145). Retrieved from Lingnan University website: http://commons.ln.edu.hk/cppswp/67/