Notebook per
An Exploration of Optimal Stabilization Policy
Citation (APA): weinzierl, g. m. m. (2014). An Exploration of Optimal Stabilization Policy [Kindle Android version]. Retrieved from Amazon.com
Parte introduttiva
Evidenzia (giallo) - Posizione 1
An Exploration of Optimal Stabilization Policy gregory mankiw matthew weinzierl
Nota - Posizione 1
Ls critica neoclassica e il paradosso del risparmio. La soluzione keynesiana: sostituire il pubblico (e le sue preferenze) ai privati Alternativa: partire dalla microeconomia e dal teorema del welfare. Non sostituirsi al privato ma neutralizzare le forze che lo bloccano Problema: il politico keynesiano ha a disposizione + strumenti, sono tutti uguali? No. Alcuni sono + rispettosi del welfare sociale. Il consumo privato nn può essere sostituito da quello pubblico: il welfare ne risente la politica fiscale deve cercare di imitare quella monetaria x non intaccare il welfare: tax credit investment il moltiplicatore non riesce a rendere conto del welfare x' non considera la composizione del pil incrementale ma si limita a misurarlo Semplificazioni: 1. non considerato il settore finanziario 2. non considerata l' apertura economica 3. non consideratà la rigidità variabile dei prezzi x settore 4. non considerati i costi del processo politico
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T
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INTRO
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What is the optimal response of monetary and fiscal policy to an economy-wide decline in aggregate demand?
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LA DOMANDA
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The textbook answer to such a situation is for policymakers to use the tools of monetary and fiscal policy to prop up aggregate demand.
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TRADIZIONE
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Traditional Keynesian economics suggests a startlingly simple solution: the government can increase its spending to make up for the shortfall in private spending. Indeed, this was one of the motivations for the stimulus package proposed by President Barack Obama and passed by Congress in early 2009.
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KEYNES
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If we as individual citizens are feeling poorer and cutting back on our spending, why should our elected representatives in effect reverse these private decisions by increasing spending and going into debt on our behalf? If the goal of government is to express the collective will of the citizenry, shouldn’t it follow the lead of those it represents by tightening its own belt?
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STRANEZZA DI KEYNES: PRODIGO IN TEMPI DI VACCHE MAGRE
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Traditional Keynesians have a standard answer to this line of thinking. According to the paradox of thrift, increased saving may be individually rational but collectively irrational. As individuals try to save more, they depress aggregate demand and thus national income.
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RISPOSTA KEYNESIANA
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Unlike traditional Keynesian analysis of fiscal policy, modern macro theory begins with the preferences and constraints facing households and firms and builds from there. This feature of modern theory is not a mere fetish for microeconomic foundations. Instead, it allows policy prescriptions to be founded on the basic principles of welfare economics.
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MICROFOUNDATION. RIFIRMA KEYNESIANA
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The model we develop to address this question fits solidly in the New Keynesian tradition.
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That is, the starting point for the analysis is an intertemporal general equilibrium model that assumes prices to be sticky in the short run.
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RIGIDITÀ
Evidenzia (giallo) - Posizione 45
We begin with the benchmark case in which the economy does not face the zero lower bound on nominal interest rates. In this case the only stabilization tool that is necessary is conventional monetary policy. Once monetary policy is set to maintain full employment, fiscal policy should be determined based on classical principles. In particular, government consumption should be set to equate its marginal benefit with the marginal benefit of private consumption.
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PRIMO CASO. TASSI
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We then examine the complications that arise because nominal interest rates cannot be set below zero. We show that even this constraint on monetary policy does not by itself give traditional fiscal policy a role as a stabilization tool. Instead, the optimal policy is for the central bank to commit to future monetary policy actions in order to increase current aggregate demand.
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2 QUANTITATIVE EASING
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A role for countercyclical fiscal policy might arise if the central bank both hits the zero lower bound on the current short-term interest rate and is unable to commit itself to expansionary future
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3
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Optimal fiscal policy then looks decidedly Keynesian
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c
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Optimal fiscal policy in this situation is one that tries to replicate the allocation of resources that would be achieved if prices were flexible. An increase in government purchases cannot accomplish that goal: although it can yield the same level of national income, it cannot achieve the same composition of it.
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COMPOSIZIONE DECISIVA
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The model suggests that tax policy should aim at increasing the level of investment spending. Something like an investment tax credit comes to mind. In essence, optimal fiscal policy in this situation tries to produce incentives similar to what would be achieved if the central bank were somehow able to reduce interest rates below zero.
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INVESTIMENTI
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A final implication of the baseline model is that the traditional fiscal policy multiplier may well be a poor tool for evaluating the welfare implications of alternative fiscal policies.
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CONCLUSIONI. MOLTIPLICATORE
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fiscal options are judged according to how many dollars of extra GDP
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IL CALCOLO TRAD DEL MOLTIPLICATORE
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But such calculations ignore the composition of GDP and therefore are potentially misleading as measures of welfare.
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COMPO WELFARE
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central bank may not be willing or able to commit to the expansionary long-term money supply M2 that is required for stabilization.
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welfare-based measure of policy effectiveness.
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—an increase in current government spending G1,
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—an increase in both current and future government spending,
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—an investment subsidy,
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we calculate a version of what is usually called the multiplier,
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We also calculate a welfare-based measure of the returns to each fiscal policy option.
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conventional emphasis on the output multiplier may be substantially misleading as a guide to optimal policy. In none of the variants considered does the policy with the largest multiplier also generate the greatest welfare gain.
Segnalibro - Posizione 136
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IX. Some Tentative Policy Conclusions
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One unambiguous implication of the analysis is that whether and how any policy instrument is used depends on which other instruments are available. To summarize the results, it is fair to say that there is a hierarchy
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GERARCHIA
Evidenzia (giallo) - Posizione 156
fiscal policy should aim at incentivizing interest-sensitive components of spending, such as investment. In essence, optimal fiscal policy tries to do what monetary policy would if it could.
Segnalibro - Posizione 161
Evidenzia (giallo) - Posizione 161
X. A Methodological Epilogue
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When considering the role of fiscal policy for dealing with an economy in recession, the first thought of many economists is the famous income-expenditure model, also known as the “Keynesian cross,” which they learned as undergraduates. With a minimum of algebra and geometry, the model shows how fiscal policy can increase aggregate demand and thereby close the gap between output and its potential.
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LA CROCE DI K
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The conventional application of these macroeconomic models for normative purposes, however, is hard to reconcile with more basic economic principles.
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L ERRORE
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Ultimately, all policy should aim to improve some measure of welfare, such as the utility of the typical individual in society. The output gap matters not in itself but rather because it must in some way be an input into welfare.
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Policymakers have various tools at their disposal with which they can influence aggregate demand. Which tools they use to bring the economy back to full employment can profoundly influence the level of welfare achieved.
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GERARCHIA
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welfare depends not only on the level of output, but also on its composition among the various components of spending.
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PRIMA IL BENESSERE
Evidenzia (giallo) - Posizione 187
We incorporate sticky prices, but we do not take into account that firms’ price setting is staggered or that different sectors may have different degrees of price rigidity.
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RIGIDITÀ
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political process
