CC_pol_gro.pdf (290.45 kB)
On stabilisation policy: are there conflicting implications for growth and welfare?
preprint
posted on 2006-11-02, 11:56 authored by Dimitrios VarvarigosThe paper examines the choices for fiscal stabilisation policy that maximise
aggregate welfare and long-run growth. This is done in the context of a
stochastic dynamic general equilibrium model where premeditated learning
provides the engine of human capital accumulation and growth, and
technology shocks provide the impulse source of fluctuations. Contrary to
existing conventional wisdom, the results indicate a conflict between the
two policy objectives: the choice of no stabilisation, associated with
maximum growth, is also associated with minimum welfare. Welfare
maximisation requires a full stabilisation response to the occurrence of
business cycles.
History
School
- Business and Economics
Department
- Economics
Pages
275337 bytesPublication date
2006Notes
This is a working paper.Language
- en