Swan diagram
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In economics, a Swan diagram, also known as the Australian model (because it was originally used by Australian economists to model the Australian economy during the Great Depression), represents the situation of a country with a currency peg. The concept was developed by Trevor Swan in 1955.
Two lines represent a country's respective internal (employment vs. unemployment) and external (current account deficit) balance with the axes representing relative domestic costs and the country's fiscal deficit. The diagram is used to evaluate the changes to the economy that result from policies that either affect domestic expenditure or the relative demand for foreign and domestic goods.
[edit] References
- Paul Krugman article on Latin American currency and the Swan diagram
- Treasury article on China which discusses the Swan diagram
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