The natural rate of output, supply-side potential and the long-term sustainable growth band for the Singapore economy

56 p.In our study, we would cover the theoretical aspects of the New Classical Economic school of thought, the Price Expectations Augmented Phillips's curve, of which would be compared and contrasted with each other. This model will encompass the rational expectations model, that was propounded by John Muth(1961). A multi-equation composed of the major sectors of the economy, like the labour and goods sector, the output sector and the wage-price sector, would be used to econometrically and empirically produce some invaluable findings, that assist economic agents in helping the Singapore economy reach its medium to long-term sustainable growth band potential. A slight replication of the model that was used by Adams and Coe( IMF Staff Papers, 1990) for the US economy would be used. But unlike the American's huge economic base of strong local demand and supply, the Singapore economy is notably highly dependent on the external demand, as we are small in our economic consumption potential. In view of the formulation of our study, we would try to provide economic agents like the Government, possible indicators or variables that can help in smoothing out the economic policy management variables, i.e. the rate of inflow of foreign labour to augment the tight labour market.BUSINES