An Exploration of Optimal Stabilization Policy

N. Gregory Mankiw and Matthew Weinzierl ()

No 17029, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines the optimal response of monetary and fiscal policy to a decline in aggregate demand. The theoretical framework is a two-period general equilibrium model in which prices are sticky in the short run and flexible in the long run. Policy is evaluated by how well it raises the welfare of the representative household. While the model has Keynesian features, its policy prescriptions differ significantly from textbook Keynesian analysis. Moreover, the model suggests that the commonly used "bang for the buck" calculations are potentially misleading guides for the welfare effects of alternative fiscal policies.

JEL-codes: E52 E62 E63 (search for similar items in EconPapers)
Date: 2011-05
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
Note: ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

Published as N. Gregory Mankiw & Matthew weinzierl, 2011. "An Exploration of Optimal Stabilization Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(1 (Spring), pages 209-272.

Downloads: (external link)
http://www.nber.org/papers/w17029.pdf (application/pdf)

Related works:
Journal Article: An Exploration of Optimal Stabilization Policy (2011)
Working Paper: An Exploration of Optimal Stabilization Policy (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:17029

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w17029

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().