Destabilizing optimal policies in the business cycle

Jean-Pascal Benassy

Journal of Economic Dynamics and Control, 2012, vol. 36, issue 9, 1364-1371

Abstract: 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.

Keywords: Destabilizing optimal policies; Business cycles; Monetary policy (search for similar items in EconPapers)
JEL-codes: E32 E52 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:36:y:2012:i:9:p:1364-1371

DOI: 10.1016/j.jedc.2012.02.009

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