AEA Papers and Proceedings
ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)
Automatic Stabilizers in a Low-Rate Environment
AEA Papers and Proceedings
vol. 110,
May 2020
(pp. 125–30)
Abstract
In a world where monetary policy cannot assume responsibility for stabilization policy, there is a strong need for fiscal policy to address stabilization issues. In this context, we argue for "semi-automatic stabilizers," aimed at reducing unemployment slumps rather than output recessions. We show that the hole left by the limits on monetary policy implies a large role for fiscal policy in general and for semi-automatic stabilizers in particular. Finally, we argue that the design of stabilizers, whether they focus on mechanisms that rely primarily on income or on intertemporal substitution effects, depends crucially on the general design of discretionary policy.Citation
Blanchard, Olivier J., and Lawrence H. Summers. 2020. "Automatic Stabilizers in a Low-Rate Environment." AEA Papers and Proceedings, 110: 125–30. DOI: 10.1257/pandp.20201075Additional Materials
JEL Classification
- E23 Macroeconomics: Production
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- E32 Business Fluctuations; Cycles
- E52 Monetary Policy
- E62 Fiscal Policy
- E63 Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy