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Stabilization Policy (stabilization + policy)
Selected AbstractsOptimal Stabilization Policy in the Presence of Learning by DoingJOURNAL OF PUBLIC ECONOMIC THEORY, Issue 2 2000Philippe Martin This paper analyses the optimal stabilization policy when growth is driven by learning by doing. If benefits of learning by doing are not fully internalized, the optimal policy is to tax labor during expansions and to subsidize it during recessions. The long-term impact of this policy depends critically on initial conditions: If stabilization starts during an expansion, it has a positive effect on long-term production. When stabilization starts during a recession, its long-term effect is negative. The paper makes a methodological contribution in its analytical derivation of the optimal policy along the transition path as well as in the steady state. [source] DELAYS IN STABILIZATION OR IN REFORMS?THE DEVELOPING ECONOMIES, Issue 3 2008THE DEBT CRISIS F13; F34; 010 Empirical analyses attributing the 1980s' debt crisis to inconsistent stabilization policies rest on an inappropriate long-run approach. Revising this long-run approach yields opposite results: terms of trade shocks and foreign indebtedness explain this crisis, regardless of domestic stabilization policies. This prompts us to consider a new hypothesis, of delays in trade-policy reforms, with a model in which terms-of-trade variation (under shocks) is endogenous to export structure and efficiency of resource allocation. Evidence from the structural equations model shows that allocation distortions negatively affect changes in terms of trade, which then explain this crisis. A political economy extension demonstrates that income inequality and regional trade policy determine the distortions, which in turn leads to this crisis. [source] Nominal debt and inflation stabilizationINTERNATIONAL JOURNAL OF ECONOMIC THEORY, Issue 4 2009Shigeto Kitano E63; F41 The "fiscal theory of currency crises" (Daniel 2001; Corsetti and Ma,kowiak 2005, 2006) claims that with long-term nominal debt, a government can delay the timing of an inevitable currency crisis that results from a fiscal shock. The present paper shows that, in contrast, long-term nominal debt might have destabilizing effects when a government introduces an inflation stabilization policy. It is shown that a stabilization policy that is successful in the absence of long-term nominal debt can cause a crisis when long-term nominal debt exists. The model implies that a government with a large stock of long-term nominal debt must overcome a high fiscal hurdle for a successful stabilization policy. This difficulty is avoidable if long-term debt is indexed to inflation. [source] Optimal Stabilization Policy in the Presence of Learning by DoingJOURNAL OF PUBLIC ECONOMIC THEORY, Issue 2 2000Philippe Martin This paper analyses the optimal stabilization policy when growth is driven by learning by doing. If benefits of learning by doing are not fully internalized, the optimal policy is to tax labor during expansions and to subsidize it during recessions. The long-term impact of this policy depends critically on initial conditions: If stabilization starts during an expansion, it has a positive effect on long-term production. When stabilization starts during a recession, its long-term effect is negative. The paper makes a methodological contribution in its analytical derivation of the optimal policy along the transition path as well as in the steady state. [source] HYSTERESIS IN UNEMPLOYMENT REVISITED: EVIDENCE FROM PANEL LM UNIT ROOT TESTS WITH HETEROGENEOUS STRUCTURAL BREAKSBULLETIN OF ECONOMIC RESEARCH, Issue 4 2009Jun-De Lee C22; C23; J64 ABSTRACT This paper applies the panel LM unit root tests with heterogeneous structural breaks in level by Im,et al. (Oxford Bulletin of Economics and Statistics, 67 (2005), pp. 393,419) to re-examine the validity of hysteresis in the unemployment rates of 19 OECD countries. Our empirical findings are favourable to the stationarity of the unemployment rates, i.e., the unemployment hysteresis hypothesis is strongly rejected. Our results suggest that shocks to unemployment rates are temporary and soon converge when we control for breaks. A major policy implication of the study is that a fiscal or monetary stabilization policy would not have permanent effects on the unemployment rates of the 19 OECD countries. [source] External Demand Decline-caused Industry Collapse in ChinaCHINA AND WORLD ECONOMY, Issue 1 2010Pingyao Lai J60; L15; L52 Abstract Industry collapse has become an important phenomenon in China's recent economic growth fluctuation. This paper develops a simple model to analyze this phenomenon. Our analysis focuses on an external demand decline-caused industry collapse. The model reveals that the combination of large-scale decline in external demand with a horizontal domestic supply curve causes the domestic export industry to undergo a sharp decrease in output in a short period of time, which further leads to a sharp decline in employment. The conventional stabilization policy is less effective in coping with this sudden industry collapse. The Chinese Government needs to formulate an appropriate structural industry stabilization policy to cope with the sudden industry collapse, and, in particular, to implement a direct employment aid program to deal with unemployment resulting from the industry collapse. [source] | ||||||||||