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Revealed Preferences for Macroeconomic Stabilization

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  • David Kiefer

Abstract

In the new Keynesian model of endogenous stabilization governments have objectives with respect to macroeconomic performance, but are constrained by an augmented Phillips curve. Because they react more quickly to inflation shocks than private agents, governments can lean against the macroeconomic wind. We develop an econometric test of this characterization of the political-economic equilibrium. Applying this methodology to a variety of quadratic social welfare functions provides inferences about the functional form of stabilization preferences and about the formation of expectations.

Suggested Citation

  • David Kiefer, 2005. "Revealed Preferences for Macroeconomic Stabilization," Working Paper Series, Department of Economics, University of Utah 2005_03, University of Utah, Department of Economics.
    • Handle: RePEc:uta:papers:2005_03
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    References listed on IDEAS

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    1. Frey, Bruno S & Schneider, Friedrich, 1978. "An Empirical Study of Politico-Economic Interaction in the United States," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 174-183, May.
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    3. Alberto Alesina, 1987. "Macroeconomic Policy in a Two-Party System as a Repeated Game," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(3), pages 651-678.
    4. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
    5. Chappell, Henry W, Jr, 1983. "Presidential Popularity and Macroeconomic Performance: Are Voters Really So Naive?," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 385-392, August.
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    More about this item

    Keywords

    Stabilization; Philips curve; public policy;
    All these keywords.

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