Question

What is called for with heterodox stabilization policies? Explain why such policies are or are not effective.

Answer 1

Heterodox stabilization policies are also called orthodox or traditional stabilization policies. it calls for tight fiscal policy and fixed exchange rate. it does not support frequent regulations on price and wages.

• Generally such policies are not effective when it comes to dealing with fluctuation in economy.
• Such tight measure may lead to further severing of recession and economic crisis.

Keynesian economists do not agree with heterodox stabilizing policies and criticize it as outdated and ineffective in dealing with economic crisis.