The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Stabilization Policy

  • David Vines
Reference work entry


The term ‘stabilization policy’ normally refers to deliberate changes in government policy instruments in response to changing macroeconomic conditions, in order to stabilize the economy. It is often used to refer to the Keynesian policies which stemmed from Keynes’s General Theory: the new commitment of many Western governments after World War II to use policy to pursue high and stable employment. (An example is the UK White Paper on Employment Policy (Minister of Reconstruction 1944).) But other types of stabilization policies had been known previously (such as the return to the Gold Standard in the UK in 1925 in order to stabilize currency values (Moggridge 1986) and have been known since (such as the policy of monetary restraint carried out in the United Kingdom in the late 1970s and early 1980s in order to stabilize inflation). In fact stabilization policy cannot easily be distinguished from macroeconomic policy in general.

This is a preview of subscription content, log in to check access.


  1. Currie, D. 1985. Macroeconomic policy design and control theory – A failed partnership? Economic Journal 95: 285–306.CrossRefGoogle Scholar
  2. Dornbusch, R. 1976. Expectations and exchange rate dynamics. Journal of Political Economy 84(6): 1161–1176.CrossRefGoogle Scholar
  3. Friedman, M. 1953. The effects of a full employment policy on economic stability: A formal analysis. In Essays in positive economics, ed. M. Friedman. Chicago: Chicago University Press.Google Scholar
  4. Friedman, M. 1968. The role of monetary policy. American Economic Review 58: 1–17.Google Scholar
  5. Kalecki, M. 1944. The white paper on employment policy. Bulletin of the Oxford Institute of Economics and Statistics 67: 131–135.Google Scholar
  6. Lucas, R.E. 1976. Econometric policy evaluation: A critique. Journal of Monetary Economics, Supplement, Carnegie-Rochester Conference Series on Public Policy 1: 19–46.Google Scholar
  7. Maddock, R., and M. Carter. 1982. A child’s guide to rational expectations. Journal of Economic Literature 20: 39–51.Google Scholar
  8. Meade, J.E. 1951. The balance of payments. London: Oxford University Press.Google Scholar
  9. Meade, J.E. 1982. Stagflation, vol. I: Wage fixing. London: George Allen & Unwin.Google Scholar
  10. Minister of Reconstruction. 1944. Employment policy, cmd. 6527, presented by the Minister of Reconstruction to Parliament. London: HMSO.Google Scholar
  11. Moggridge, D.E. 1986. Keynes and the international monetary system, 1909–46. In International monetary problems and supply-side economics, ed. J.S. Cohen and G.C. Harcourt. London: Macmillan.Google Scholar
  12. Phillips, A.W. 1954. Stabilization policy in a closed economy. Economic Journal 64: 290–323.CrossRefGoogle Scholar
  13. Phillips, A.W. 1957. Stabilization policy and the time-forms of lagged responses. Economic Journal 67: 265–277.CrossRefGoogle Scholar
  14. Poole, W. 1970. Optimal choice of monetary policy instruments in a simple stochastic macro model. Quarterly Journal of Economics 84: 197–216.CrossRefGoogle Scholar
  15. Preston, A.J., and A.R. Pagan. 1982. The theory of economic policy, statics and dynamics. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  16. Swan, T.W. 1960. Economic control in a dependent economy. Economic Record 36: 51–66.CrossRefGoogle Scholar
  17. Tinbergen, J. 1952. On the theory of economic policy. Amsterdam: North-Holland.Google Scholar
  18. Tobin, J. 1975. Keynesian models of recession and depression. American Economic Review: Papers and Proceedings 65: 195–202.Google Scholar
  19. Tobin, J. 1980. Stabilization policy ten years after. Brookings Papers on Economic Activity (1) (10th Anniversary Issue): 19–71.Google Scholar
  20. Vines, D. 1986. Macroeconomic policy after monetarism. Royal Bank of Scotland Review.Google Scholar
  21. Vines, D., J.M. Maciejowski, and J.E. Meade. 1983. Stagflation vol. II: Demand management. London: George Allen & Unwin.Google Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • David Vines
    • 1
  1. 1.