Economic stabilization

Economic stabilization

Economic stabilization means the maintenance of a relatively stable and favorably level of economic indicators.

 A stabilization policy is a package or set of measures introduced to stabilize a financial system or economy. The term can refer to policies in two distinct sets of circumstances: business cycle stabilization and crisis stabilization.

Economic stabilization is the result of the governmental use of direct and indirect controls to maintain and stabilize the nation’s economy during emergency conditions. The direct control measures employed by the government include setting or freezing of wages, prices, and rents or the direct rationing of goods. Indirect controls measures include monetary, credit, tax, or other policy measures.

Economic stabilization is achieved through a combination of monetary and other policy actions of the government.

Therefore monetary policy measures involve deliberate changes in government policy instrument in response to changes in macroeconomic condition in order to stabilize the economic.

Macroeconomic stability is reflected by a low level of inflation and sustainable growth rate and current balance. In the short run, macro –economic stability is the emphasis of monetary policy.

However, it is also called open to ensure wider range of other objectives which includes the restoration of external balance maintenance.

Debates about the theory of stabilization policy operation at two levels.

At one level, there are discussions about the kind of policy, which a government possesses on economy issues such as objectiveness and instruments which it should use for example Keynesian versus monetarist policy. At another 49 level, there are discussions about the technical details of a governments chosen kind of policy for about whether instrument should be assigned to targets and about how policy can be prevented from actually amplifying.