Demand-Side Stabilization Policies: What is the Evidence of their Potential?

Magda Kandil

No 2000/197, IMF Working Papers from International Monetary Fund

Abstract: Using disaggregated data for the United States, this paper explores the effects of the variability of fiscal and monetary policy shocks. Higher variability of government spending shocks around a steady-state growth trend results, on average, in a decline in aggregate demand growth and inflation, with limited effects on output growth. On the other hand, higher variability of monetary shocks results, on average, in an increase in inflation and a decline in output growth. These results indicate the desirability of avoiding large fluctuations over time in either government spending or the money supply.

Keywords: WP; money supply; government spending shock; durable goods; Fiscal policy; monetary policy; asymmetric fluctuations; price inflation; aggregate demand shift; shocks decrease; supply curve; contraction decrease; aggregate demand demand shock; Monetary base; Private consumption; Private investment; Production growth (search for similar items in EconPapers)
Pages: 31
Date: 2000-12-01
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Citations: View citations in EconPapers (1)

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Journal Article: Demand-side stabilization policies: What is the evidence of their potential? (2009)
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