Paper #476

Títol:

Endogenous business cycles and stabilization policies

Autors:

Marta Aloi, Hans Jorgen Jacobsen i Teresa Lloyd Braga

Data:

Setembre 1998

Resum:

The paper reports results on the effects of stylized stabilization policies on endogenously created fluctuations. A simple monetary model with intertemporally optimizing agents is considered. Fluctuations in output may occur due to fluctuations in labor supply which are again caused by volatile expectations which are ``self fulfilling'', i.e. correct given the model. It turns out that stabilization policies that are sufficiently countercyclical in the sense that government spending (on transfers or demand) depends sufficiently strongly negatively on GNP-increases can stabilize the economy at a monetary steady state for an arbitrarily low degree of distortion of that steady state. Such stabilization has unambiguously good welfare effects and can be achieved without features such as positive lump sum taxation or negative income taxation as part of the stabilization policy.

Paraules clau:

Endogenous business cycles, stabilization policy

Codis JEL:

E32, E63

Àrea de Recerca:

Macroeconomia i Economia Internacional

Publicat a:

International Economic Review, 44 (2003), 3 (08), pp. 895-915

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