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The Cost of Business Cycles and the Benefits of Stabilization: A Survey

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  • Gadi Barlevy

Abstract

This article reviews the literature on the cost of U.S. post-War business cycle fluctuations. I argue that recent work has established this cost is considerably larger than initial work found. However, despite the large cost of macroeconomic volatility, it is not obvious that policymakers should have pursued a more aggressive stabilization policy than they did. Still, the fact that volatility is so costly suggests stable growth is a desirable goal that ought to be maintained to the extent possible, just as policymakers are currently required to do under the Balanced Growth and Full Employment Act of 1978. This survey was prepared for the Economic Perspectives, a publication of the Federal Reserve Bank of Chicago.

Suggested Citation

  • Gadi Barlevy, 2004. "The Cost of Business Cycles and the Benefits of Stabilization: A Survey," NBER Working Papers 10926, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:10926
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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • D6 - Microeconomics - - Welfare Economics

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