Dynamic Coordination and the Optimal Stimulus Policies

Datos Bibliográficos

ID9709643
AutoresBernardo Guimaraes (0000-0003-0098-2174, Sao Paulo School of Economics – FGV, autor de correspondencia), Caio Machado (0000-0002-5545-6270, Pontificia Universidad Católica de Chile)
Año2018
Volumen128
Número615
Páginas2785-2811
Fecha de publicación2018-11-01
Peer ReviewedSí
Open AccessSí
TipoARTICLE
RevistaThe Economic Journal (JOURNAL)
Identificadores de la revistaISSN: 0013-0133 • E-ISSN: 1468-0297
EditorialOxford University Press (OUP) (PUBLISHER)
DOI10.1111/ecoj.12547
OpenAlexW2754011027
IdiomaEN
Citas recibidas1
Referencias citadas48

This article studies stimulus policies in a simple macroeconomic model featuring a dynamic coordination problem that arises from demand externalities and fixed costs of investment. In times of low economic activity, firms face low demand and hence have lower incentives for investing, which reinforces their low‐demand expectations. In a benchmark case with no shocks, the economy might get trapped in a low‐output regime and a social planner would be particularly keen to incentivise investment at times of low economic activity. However, this result vanishes once shocks are considered

Demand shock · Economics · Externality · Incentive · Investment (military · Macroeconomics · Microeconomics · Monetary economics · Planner · Social planner · Stimulus (psychology · Economic theories and models · Economic Theory and Institutions · Economic Theory and Policy