Should Regulation Be Countercyclical?
30 Pages Posted: 10 Nov 2016 Last revised: 20 Nov 2016
Date Written: November 4, 2016
Politicians and commentators have from time to time proposed that regulations be suspended or delayed during recessions because of their adverse impact on employment. We evaluate this argument from within a macroeconomic framework. We argue that a case can be made for what we call countercyclical regulation if certain empirical premises are valid; explore the ways in which such regulation might best be designed; and evaluate the legal authority of agencies to issue countercyclical regulations. Because the empirical premises for countercyclical regulation are highly uncertain, it should be adopted on an experimental basis.
Keywords: Macroeconomics, Regulation, Fiscal Policy, Monetary Policy, Automatic Stabilizers, EPA, Environment
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