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Can Stabilisation Policy Reduce Long-Run Growth?

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Author Info
Blackburn, Keith

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Abstract

This paper presents an analysis of the long-run implications of short-term stabilization policy. The analysis is based on a simple, stochastic model of an imperfectly competitive economy with nominal rigidities and an endogenous technology. By virtue of the latter, temporary shocks have permanent effects such that the cyclical and secular properties of output are related. In particular, smoother cyclical fluctuations may be associated with flatter secular trends, implying a trade-off between short-term stabilization and long-term growth.

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Publisher Info
Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 109 (1999)
Issue (Month): 452 (January)
Pages: 67-77
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Handle: RePEc:ecj:econjl:v:109:y:1999:i:452:p:67-77

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  1. Dimitrios Varvarigos, 2006. "On stabilisation policy: Are there conflicting implications for growth and welfare?," Discussion Paper Series 2006_19, Department of Economics, Loughborough University, revised Jul 2006. [Downloadable!]
  2. E Andreou & A Pelloni & M Sensier, 2003. "The effect of nominal shock uncertainty on output growth," Centre for Growth and Business Cycle Research Discussion Paper Series 40, Economics, The Univeristy of Manchester. [Downloadable!]
  3. Ayhan Kose & Marco E. Terrones & Eswar Prasad, 2004. "How do trade and financial integration affect the relationship between growth and volatility?," Proceedings, Federal Reserve Bank of San Francisco, issue Jun. [Downloadable!]
    Other versions:
  4. Galindev Ragchaasuren, 2005. "On the Effect of Monetary Stabilisation Policy on Long-run Growth (Revised September 2005)," Economics Discussion Papers 587, University of Essex, Department of Economics. [Downloadable!]
  5. Matthew Rafferty, 2003. "Do Business Cycles Influence Long-Run Growth? The Effect of Aggregate Demand on Firm-Financed R&D Expenditures," Eastern Economic Journal, Eastern Economic Association, vol. 29(4), pages 607-618, Fall. [Downloadable!]
  6. K Blackburn & A Pelloni, 2002. "Growth, Cycles and Stabilisation Policy," Centre for Growth and Business Cycle Research Discussion Paper Series 12, Economics, The Univeristy of Manchester. [Downloadable!]
    Other versions:
  7. K Blackburn & A Pelloni, 2001. "On the Relationship Between Growth and Volatility in Learning-by-Doing Economies," Centre for Growth and Business Cycle Research Discussion Paper Series 01, Economics, The Univeristy of Manchester. [Downloadable!]
  8. Elena Andreou & Alessandra Pelloni & Marianne Sensier, 2008. "Is Volatility Good for Growth? Evidence from the G7," The School of Economics Discussion Paper Series 0804, Economics, The University of Manchester. [Downloadable!]
    Other versions:
  9. K Blackburn & D Varvarigos, 2006. "Human Capital Accumulation in a Stochastic Environment: Some New Results on the Relationship Between Growth and Volatility," Centre for Growth and Business Cycle Research Discussion Paper Series 74, Economics, The Univeristy of Manchester. [Downloadable!]
  10. Mark Setterfield, 2003. "Supply and Demand in the Theory of Long-run Growth: introduction to a symposium on demand-led growth," Review of Political Economy, Taylor and Francis Journals, vol. 15(1), pages 23-32, January. [Downloadable!] (restricted)
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