), while the fourth dimension comprises the simultaneous clearing conditions in all the markets subject to sectoral budget constraints. In this conceptual framework, failures or shortcomings with respect to any of the first three dimensions will have implications for market clearing conditions which will in turn feed back on the real economy.
In the popular discussion of economic developments over recent decades, it is the second type of cause - the tendency for monetary policy to contribute to booms and busts - that has been the focus of attention. Fortunately, it is also the type that we have most chance of avoiding if we play our cards right.