fbpx An Exploration of Optimal Stabilization Policy | Harvard Kennedy School

Additional Authors:

  • N. Gregory Mankiw
  • Matthew Weinzierl


An Exploration of Optimal Stabilization Policy. N. Gregory Mankiw, Matthew Weinzierl, Spring 2011, Paper. "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. Although the model has Keynesian features, its policy prescriptions differ significantly from those of textbook Keynesian analysis. Moreover, the model suggests that the..." Link