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| Author: | Aloi, M. Lloyd-Braga, T. Whitta-Jacobsen, H. J. |
| Title: | Endogenous business cycles and systematic stabilization policy |
| Journal: | International Economic Review
2003 : AUG, VOL. 44:3, p. 895-915 |
| Index terms: | Business cycles Stabilization Fiscal policy |
| Language: | eng |
| Abstract: | The authors study the effects of fiscal policy rules on the determinancy of rational expectations equilibrium in a perfectly competitive monetary model with constant returns. The authors show that policy rules that let the GNP share of government spending depend sufficiently negatively on increases in GNP stabilize the economy with respect to endogenous fluctuations for arbitrarily little distortion of the steady state at which stabilization occurs. The rules do not involve lump-sum taxation, negative income taxation, or exact knowledge of the economy's laissez-faire staedy state. |
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