Revealed Preferences for Macroeconomic Stabilization

David Kiefer

Working Paper Series, Department of Economics, University of Utah from University of Utah, Department of Economics

Abstract: In the new Keynesian model of endogenous stabilization governments have objectives with respect to macroeconomic performance, but are constrained by an augmented Phillips curve. Because they react more quickly to inflation shocks than private agents, governments can lean against the macroeconomic wind. We develop an econometric test of this characterization of the political-economic equilibrium. Applying this methodology to a variety of quadratic social welfare functions provides inferences about the functional form of stabilization preferences and about the formation of expectations.

Keywords: Stabilization; Philips curve; public policy (search for similar items in EconPapers)
Pages: 27 pages
Date: 2005
New Economics Papers: this item is included in nep-mac, nep-pbe and nep-pol
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Published in Journal of Applied Economics, May 2008 11(1), pp.119-43.

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Persistent link: https://EconPapers.repec.org/RePEc:uta:papers:2005_03

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