Stabilisation Policy in a Closed Economy Author(s): A. W. Phillips ...

304 THE ECONOMIC JOURNAL [JINE
The application of a stabilisation policy having a proportional
correction factor of 2 and a correction lag with a time constant
of 6 months would change the response to that shown by Curve
(b) of Fig. 9, and the addition to this policy of an integral element
with a correction factor of 2 would change the response to that
shown by Curve (c). As might be expected, the effect of the ac-
celeration relationship has been to increase both the magnitude
and the duration of the fluctuations resulting from these policies.
(These responses may be compared with those shown by Curve
(c) of Fig. 3 and Curve (c) of Fig. 7.)
Is
P 4
FIG. 9
Curve (a), no stabilisation policy.
Curve (b), fp = 2, T = 6 months.
Curve (c), fp = 2,fs = 2, T = 6 months.
Curve (d), fp = 2, = 2, fd O055, T = 6 months.
Curve (e), f = 8,fs = 8,fd =d 13, T = 6 months.
To eliminate these fluctuations it would be necessary to add
a derivative element to stabilisation policy. A derivative correc-
tion factor of 0-3 would be needed to offset the acceleration
coefficient of 0-6 (the derivative correction factor need be only
half the size of the acceleration coefficient in this case, since the
length of the correction lag is only half that of the acceleration
lag), and an additional derivative correction factor of 0*25 would
be needed to eliminate the fluctuations introduced by the propor-
tional and integral elements of the stabilisation policy. Adding
therefore a derivative element with a correction factor of 0.55
the response shown by Curve (d) of Fig. 9 is obtained. Finally,
if the stabilisation policy was strengthened by multiplying each