Contractionary Effects of Stabilization and Long-Run Growth

Dutt, Amitava K.; Ros, Jaime

This paper reviews models of long-run growth which assume that the economy is not on its so-called "normal" path, and in which both aggregate demand and aggregate supply issues have a role in determining long-run growth. This review shows that contractionary stabilization policies can have adverse long-run effects on growth, and may in fact exacerbate the problems they were intended to solve.


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Initiative for Policy Dialogue
Initiative for Policy Dialogue
Initiative for Policy Dialogue Working Paper Series
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February 4, 2010


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