Abstract
This chapter aims at discussing an essential idea concerning the economic stabilization policy and its outcome from a dynamics perspective., focusing on a theoretical discussion of the consequences of the stabilization policy. In the current economic situation, not only the fragility of the financial system but also the erratic fluctuation of the economy resulting from operational issues have become apparent. Among financial matters, such as the expansion of the budget deficit, the importance of a stabilization policy via the policy instruments is increasing. In this context, the paper explores the discipline of the stabilization system.
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Notes
- 1.
In this context, note that it does not mention the automatic stabilizer of the economy (built-in stabilizer). The built-in stabilizer, such as the progressive taxation system, is known as one of the effective means of stabilizing the economy. In the case of introducing it, for example, a formula \(u=u(x)\) leads to the stability conditions concerning (1) to be expressed as follows:
$$\frac{d\dot{x}}{dx} = \phi _x +\phi _u u^{\prime }(x)< 0\,\,or\,\,u^{\prime }(x)< -\frac{\phi _x }{\phi _u }< 0.$$ - 2.
- 3.
In the equilibrium, these target values are adjusted to be zero.
- 4.
The analytical framework here depends on Lancaster (1973). Also, there are analyses such as Pohjola (1983, 1984) and Zeeuw (1992). In Pohjola (1984), in response to the previous study, incentives, both institutional and consensus rules of the cooperation policy in capitalism, are analyzed, and the fact that the presence of the Nash bargaining solution in the Lancaster model is proven to affect the bargaining solution with the nature of the threat optimum strategy has been analyzed. Moreover, Pohjola (1983) conducted a comparative study of the Nash and Stackelberg solutions, where dynamic biological inefficiencies that were dealt with in this section are likely to be reduced by the Stackelberg solution. It also proved that the Stackelberg game is in a state of stalemate because both workers and capitalists never act as leaders.
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Yabuta, M. (2016). A Mathematical Note on Stabilization Policy and Dynamic Inefficiency. In: Matsumoto, A., Szidarovszky, F., Asada, T. (eds) Essays in Economic Dynamics. Springer, Singapore. https://doi.org/10.1007/978-981-10-1521-2_14
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DOI: https://doi.org/10.1007/978-981-10-1521-2_14
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