Working Paper: NBER ID: w10926
Authors: Gadi Barlevy
Abstract: This article reviews the literature on the cost of U.S. post-War business cycle fluctuations. I argue that recent work has established this cost is considerably larger than initial work found. However, despite the large cost of macroeconomic volatility, it is not obvious that policymakers should have pursued a more aggressive stabilization policy than they did. Still, the fact that volatility is so costly suggests stable growth is a desirable goal that ought to be maintained to the extent possible, just as policymakers are currently required to do under the Balanced Growth and Full Employment Act of 1978. This survey was prepared for the Economic Perspectives, a publication of the Federal Reserve Bank of Chicago.
Keywords: No keywords provided
JEL Codes: E32; E63; D6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| macroeconomic volatility (E39) | consumption levels (E21) |
| macroeconomic volatility (E32) | welfare (I38) |
| stabilization policies (E63) | consumption growth (E20) |
| stabilization policies (E63) | consumption volatility (E20) |
| business cycle fluctuations (E32) | costs of business cycles (E32) |
| costs of business cycles (E32) | optimal level of stabilization (E63) |