IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

An Exploration of Optimal Stabilization Policy

  • N. Gregory Mankiw
  • Matthew weinzierl

This paper examines the optimal response of monetary and fiscal policy to a decline in aggregate demand. The theoretical framework is a two-period general equilibrium model in which prices are sticky in the short run and flexible in the long run. Policy is evaluated by how well it raises the welfare of the representative household. Although the model has Keynesian features, its policy prescriptions differ significantly from those of textbook Keynesian analysis. Moreover, the model suggests that the commonly used “bang for the buck†calculations are potentially misleading guides for the welfare effects of alternative fiscal policies.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.brookings.edu/~/media/Files/Programs/ES/BPEA/2011_spring_bpea_papers/2011a_bpea_mankiw.pdf
Download Restriction: no

Article provided by Economic Studies Program, The Brookings Institution in its journal Brookings Papers on Economic Activity.

Volume (Year): 42 (2011)
Issue (Month): 1 (Spring) ()
Pages: 209-272

as
in new window

Handle: RePEc:bin:bpeajo:v:42:y:2011:i:2011-01:p:209-272
Contact details of provider: Postal: 1775 Massachusetts Ave NW, Washington DC 20036
Phone: (202) 797-6000
Fax: (202) 797-6004
Web page: http://www.brookings.edu/economics.aspxEmail:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Isabel Correia & Emmanuel Farhi & Juan Pablo Nicolini & Pedro Teles, 2013. "Unconventional Fiscal Policy at the Zero Bound," American Economic Review, American Economic Association, vol. 103(4), pages 1172-1211, June.
  2. Tobin, James, 1977. "How Dead Is Keynes?," Economic Inquiry, Western Economic Association International, vol. 15(4), pages 459-68, October.
  3. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2001. "Nominal rigidities and the dynamic effects of a shock to monetary policy," Working Paper Series WP-01-08, Federal Reserve Bank of Chicago.
  4. Woodford, Michael, 2010. "Simple Analytics of the Government Expenditure Multiplier," CEPR Discussion Papers 7704, C.E.P.R. Discussion Papers.
  5. Frank Smets & Raf Wouters, 2002. "An estimated dynamic stochastic general equilibrium model of the euro area," Working Paper Research 35, National Bank of Belgium.
  6. Barro, Robert J & Grossman, Herschel I, 1971. "A General Disequilibrium Model of Income and Employment," American Economic Review, American Economic Association, vol. 61(1), pages 82-93, March.
  7. Gauti Eggertsson, 2010. "The paradox of toil," Staff Reports 433, Federal Reserve Bank of New York.
  8. Gauti B. Eggertsson & Michael Woodford, 2003. "The Zero Bound on Interest Rates and Optimal Monetary Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 139-235.
  9. Paul R. Krugman, 1998. "It's Baaack: Japan's Slump and the Return of the Liquidity Trap," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 137-206.
Full references (including those not matched with items on IDEAS)

This item is featured on the following reading lists or Wikipedia pages:

  1. Economic Logic blog

When requesting a correction, please mention this item's handle: RePEc:bin:bpeajo:v:42:y:2011:i:2011-01:p:209-272. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Eric Encarnacion)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.