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Globally-Stabilizing Fiscal Policy Rules
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Jang-Ting Guo
Published/Copyright:
July 1, 2003
This paper demonstrates how fiscal policy rules can be designed to eliminate all forms of endogenous fluctuations in a one-sector growth model with increasing returns-to-scale. When the policy rules are implemented, agents' optimal decisions depend only on the current state of the economy and not on any expected future states. This property shuts down the mechanism for expectations-driven fluctuations. The proposed policy rules ensure a globally unique and stable equilibrium, regardless of the degree of increasing returns.
Published Online: 2003-7-1
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Articles in the same Issue
- Article
- Stochastic Growth with Increasing Returns: Stability and Path Dependence
- Bootstrap Neural Network Cointegration Tests Against Nonlinear Alternative Hypotheses
- Globally-Stabilizing Fiscal Policy Rules
- A Nonlinear Approach to Forecasting with Leading Economic Indicators
- Erratum
- Algorithm
- Reconstructing the Kalman Filter for Stationary and Non Stationary Time Series
