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Stabilization Policies and Business Cycle Dynamics

In: Business Cycle Dynamics and Stabilization Policies

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  • Hajime Hori

    (Tohoku University)

Abstract

Stabilization policies interfere with the dynamic workings of the economic system to which they are applied. As a result, they necessarily generate some dynamic repercussions in the process. This chapter analyzes the dynamic interplay between stabilization policies, capital accumulation, and business cycles. Capital accumulation is an integral part of business cycles. It is not just a component of demand but an addition to the economy’s productive capacity, and, as such, has a lasting influence on employment. As a result, by affecting capital accumulation, stabilization policies can modify the entire shape of business cycles. Assuming a feedback-type policy function, it is shown that, due to the crowding-out effect of fiscal expenditures, too intensive implementation of fiscal stabilization policies leads to instability of the dynamics, but that suitably coordinated monetary policy may be capable of recovering stability.

Suggested Citation

  • Hajime Hori, 2017. "Stabilization Policies and Business Cycle Dynamics," Advances in Japanese Business and Economics, in: Business Cycle Dynamics and Stabilization Policies, chapter 0, pages 77-135, Springer.
    • Handle: RePEc:spr:advchp:978-981-10-3081-9_3
    DOI: 10.1007/978-981-10-3081-9_3
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    Cited by:

    1. Vasily E. Tarasov, 2019. "Rules for Fractional-Dynamic Generalizations: Difficulties of Constructing Fractional Dynamic Models," Mathematics, MDPI, vol. 7(6), pages 1-50, June.

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