Stabilization Policy

Filed Under » , , ,
Dictionary Says

Definition of 'Stabilization Policy'

A macroeconomic strategy enacted by governments and central banks to keep economic growth stable, along with price levels and unemployment. Ongoing stabilization policy includes monitoring the business cycle and adjusting benchmark interest rates to control aggregate demand in the economy. The goal is to avoid erratic changes in total output, as measured by Gross Domestic Product (GDP) and large changes in inflation; stabilization of these factors generally leads to moderate changes in the employment rate as well.

Investopedia Says

Investopedia explains 'Stabilization Policy'

Stabilization policies are also used to help an economy recover from a specific economic crisis or shock, such as sovereign debt defaults or a stock market crash.  In these instances stabilization policies may come from governments directly through overt legislation, securities reforms, or from international banking groups, such as the World Bank.

As economies become more complex and advanced, top economists believe that maintaining a steady price level and pace of growth is the key to long-term prosperity. When any of the aforementioned variables becomes too volatile, there are unforeseen consequences and effects to the broad economy that keep markets from functioning at their optimum level of efficiency.

Most  modern economies employ stabilization policies, with much of the work being done by central banking authorities like the U.S. Federal Reserve Board. Stabilization policy is largely credited with the moderate but positive rates of GDP growth seen in the United States since the early 1980s.
Search results for

'Stabilization Policy'

  • Stagflation, 1970s Style

    http://www.investopedia.com/articles/economics/08/1970-stagflation.asp
    ... who won a Nobel Prize in 1976 for his work on consumption, monetary history and
    theory, and for his demonstration of the complexity of stabilization policy. ...

  • How The Federal Reserve Manages Money Supply

    http://www.investopedia.com/articles/08/fight-recession.asp
    ... The basic ideas of economic stabilization policy were foreign at the time,
    dating only from John Maynard Keynes' work in 1936. Instead ...

  • CFA Level 1 Study Guide - Equity Investments - Life Cycle Analysis ...

    http://www.investopedia.com/exam-guide/cfa-level-1/equity-investments/life-cycle-analysis-industry-life-cycle.asp
    ... 4.19 The Equation of Exchange; 4.20 Inflation; 4.21 Phillips Curve; 4.22 Fiscal
    Policy Basics; ... 5.16 Effect of Monetary Policy; 5.17 Fixed vs. ...

  • The New World Of Emerging Market Currencies

    http://www.investopedia.com/articles/forex/07/emergingmarketcurrencies.asp
    ... This bias helps to dictate intermediate direction in monetary policy while measuring ...
    during this period of Federal Reserve rate stabilization, traders looking ...

  • The Re-Emerging Play In Emerging Markets

    http://stocks.investopedia.com/stock-analysis/2012/The-Re-Emerging-Play-In-Emerging-Markets-EEM-VWO-SCHE-EEB0208.aspx
    ... Policy makers within Europe agreed to tighter budget controls, via a fiscal ... confidence
    numbers from the United States show signs of stabilization among global ...

  • Credit Crisis: Government Response | Investopedia

    http://www.investopedia.com/university/credit-crisis/credit-crisis6.asp
    ... Crashes Feature.) Following passage of the Emergency Economic Stabilization Act
    of ... during an economic downturn is an improvement over policy makers' actions ...

  • Housing Data More Than A Little Deceptive

    http://stocks.investopedia.com/stock-analysis/2009/Housing-Data-More-Than-A-Little-Deceptive-XHB-TOL-DHI-PHM0720.aspx
    ... Homebuilders Banking on Stabilization of Fundamentals Also, the homebuilding group
    already reflects a stabilization of fundamentals in the industry. ...

  • Panel Says CPP Not Helping Smaller Banks

    http://stocks.investopedia.com/stock-analysis/2010/Panel-Says-CPP-Not-Helping-Smaller-Banks-BPFH-FMER-UMPQ0716.aspx
    ... The Troubled Asset Relief Program (TARP) was authorized by the Emergency Economic
    Stabilization Act, passed in 2008 during the waning days of the Bush ...

  • A Review Of 2009 In Property and Casualty Insurance

    http://stocks.investopedia.com/stock-analysis/2009/A-Review-Of-2009-In-Property-and-Casualty-Insurance-TRV-CB-AIG-BRK.A1229.aspx
    ... Another quarterly survey from Aon Analytics indicated a similar stabilization
    of pricing among many commercial insurance lines. ...

  • Was It Really A Bailout?

    http://stocks.investopedia.com/stock-analysis/2010/Was-It-Really-A-Bailout-HIG-DFS-MS-GS0323.aspx
    ... These programs were authorized by the Emergency Economic Stabilization Act of 2008
    in an attempt to stem the panic afflicting the US banking system at the time ...

Related Articles

Trading Center
Partner Links