stabilization policies versus intertemporal policy reversals

Snower, Dennis J. (March 1981) stabilization policies versus intertemporal policy reversals. Former Series > Forschungsberichte / Research Memoranda 161


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abstract: this paper deals with the question whether stabilization policies are socially desirable. it is assumed that these policies do not induce cyclical fluctuations in national or sectoral outputs. the paper argues that whenever (a) government policy impulses have welfare effects in the present and future and (b) there is an intertemporal tradeoff between these welfare effects, cyclical output fluctuations may be in the best public interest. in the context of two-sector models, cyclical production paths are shown to be the socially optimal responses to two macroeconomic problems: (1) an output mix which is not appropriate to society's preferences and (2) an inefficient use of productive factors. the optimal production paths reverse their directions of movement through time and thus suggest that "intertemporal policy reversals" may be preferable to stabilization policies.;

Item Type: IHS Series
Date Deposited: 26 Sep 2014 10:34
Last Modified: 01 Apr 2016 14:07

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