Modern Perspectives on Stabilization Policies

• Authors: Jordi Galí.
• BSE Working Paper: 110695 | September 15
• Keywords: Business cycles , inefficient allocations , government spending multiplier , non-Ricardian households , countercyclical policies
• JEL codes: E32, E63
• Business cycles
• inefficient allocations
• government spending multiplier
• non-Ricardian households
• countercyclical policies

The present paper describes recent research on two central themes of Keynes’ General Theory: (i) the social waste associated with recessions, and (ii) the effectiveness of fiscal policy as a stabilization tool. The paper also discusses some evidence on the extent to which fiscal policy has been used as a stabilizing tool in industrial economies over the past two decades.