The "Magic Square" of Economic Policy

January 3, 2017
The "Magic Square" of Economic Policy Pixabay

The macroeconomic performance of eleven euro zone area countries is evaluated over time and across countries.

The "Magic Square of Economic Policy" highlights four main goals of economic policy: growth, full employment, price stability, and balanced trade. A Macroeconomic Performance Index can be used to assign relative weights to the dierent goals within the Magic Square, giving a single index number per year per country. The legitimacy of the simplest weighting scheme that assigns equal weight to all four goals is discussed.

Author: Oliver Picek
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