Revealed Preferences for Macroeconomic Stabilization
AbstractIn the new Keynesian model of endogenous stabilization governments have objectives with respect to macroeconomic performance, but are constrained by an augmented Phillips curve. Because they react more quickly to inflation shocks than private agents, governments can lean against the macroeconomic wind. We develop an econometric test of this characterization of the political-economic equilibrium. Applying this methodology to a variety of quadratic social welfare functions provides inferences about the functional form of stabilization preferences and about the formation of expectations.
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Bibliographic InfoPaper provided by University of Utah, Department of Economics in its series Working Paper Series, Department of Economics, University of Utah with number 2005_03.
Length: 27 pages
Date of creation: 2005
Date of revision:
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Stabilization; Philips curve; public policy;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-06-14 (All new papers)
- NEP-MAC-2005-06-14 (Macroeconomics)
- NEP-PBE-2005-06-14 (Public Economics)
- NEP-POL-2005-06-14 (Positive Political Economics)
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