Destabilizing optimal policies in the business cycle
It is often believed that governments should either abstain from leading activist policies, or if they lead such policies, that these policies should somehow be “stabilizing”, in the sense of reducing the volatilities of some endogenous variables. We construct a model with explicit foundations where the optimal policies are activist, and they make both employment and output more volatile than in the no intervention case.
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Volume (Year): 36 (2012)
Issue (Month): 9 ()
Pages: 1364-1371
| Handle: | RePEc:eee:dyncon:v:36:y:2012:i:9:p:1364-1371 |
| DOI: | 10.1016/j.jedc.2012.02.009 |
| Contact details of provider: | Web page: http://www.elsevier.com/locate/jedc
|
References listed on IDEAS
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- Bhattacharya, Joydeep & Singh, Rajesh, 2008. "Optimal choice of monetary policy instruments in an economy with real and liquidity shocks," Journal of Economic Dynamics and Control, Elsevier, vol. 32(4), pages 1273-1311, April.
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- Sargent, Thomas J & Wallace, Neil, 1975. ""Rational" Expectations, the Optimal Monetary Instrument, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 83(2), pages 241-254, April.
- Ireland, Peter N, 1996. "The Role of Countercyclical Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 704-723, August. Full references (including those not matched with items on IDEAS)
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