Stabilization Policy and Private Economic Behavior

Martin Neil Baily

Martin Neil Baily Senior Fellow Emeritus - Economic Studies, Center on Regulation and Markets

Discussants: Benjamin M. Friedman and

BMF

Benjamin M. Friedman Harvard University

Edmund S. Phelps

ESP

Edmund S. Phelps Columbia University

WILL THE initiation of active macroeconomic stabilization policies change the behavior of the private sector? If so, what will these changes be? And what are their implications for the design and effectiveness of stabilization policy? I will use two ways of searching for answers to these questions. The first is empirical. It involves looking at recent history and trying to discern relevant signs or patterns. The aim is to describe how the private sector has responded to cyclical fluctuations and how these responses have changed over time.