The Cost of Business Cycles and the Benefits of Stabilization: A Survey

   (692 K)

This article reviews the literature on the cost of U.S. post-War business cycle fluctuations. I argue that recent work has established this cost is considerably larger than initial work found. However, despite the large cost of macroeconomic volatility, it is not obvious that policymakers should have pursued a more aggressive stabilization policy than they did. Still, the fact that volatility is so costly suggests stable growth is a desirable goal that ought to be maintained to the extent possible, just as policymakers are currently required to do under the Balanced Growth and Full Employment Act of 1978. This survey was prepared for the Economic Perspectives, a publication of the Federal Reserve Bank of Chicago.

Published: Barlevy, Gadi. "The Cost Of Business Cycles Under Endogenous Growth," American Economic Review, 2004, v94(4,Sep), 964-990.

This paper is available as PDF (692 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX