Globally-Stabilizing Fiscal Policy Rules

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Globally-Stabilizing Fiscal Policy Rules

Author Info

Jang-Ting Guo (University of California, Riverside)
Kevin Lansing (Federal Reserve Bank of San Francisco)

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Abstract

This paper demonstrates how fiscal policy rules can be designed to eliminate all forms of endogenous fluctuations in a one-sector growth model with increasing returns-to-scale. When the policy rules are implemented, agents' optimal decisions depend only on the current state of the economy and not on any expected future states. This property shuts down the mechanism for expectations-driven fluctuations. The proposed policy rules ensure a globally unique and stable equilibrium, regardless of the degree of increasing returns.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal Studies in Nonlinear Dynamics & Econometrics.

Volume (Year): 7 (2003)
Issue (Month): 2 ()
Pages: 1103-1103
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Handle: RePEc:bep:sndecm:7:2003:2:1103-1103

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References listed on IDEAS
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