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Can Stabilisation Policy Reduce Long-Run Growth?

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  • Blackburn, Keith

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.

Suggested Citation

  • Blackburn, Keith, 1999. "Can Stabilisation Policy Reduce Long-Run Growth?," Economic Journal, Royal Economic Society, vol. 109(452), pages 67-77, January.
  • Handle: RePEc:ecj:econjl:v:109:y:1999:i:452:p:67-77
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