Rethinking stabilization policies; Including supply-side measures and entrepreneurial processes

Area of Science:

• Economics
• Macroeconomic Policy
• Crisis Management

Background:

• Traditional macroeconomic stabilization policies primarily target aggregate demand, proving insufficient for complex crises like COVID-19.
• The COVID-19 crisis impacted both demand and supply sides, revealing limitations in existing monetary and fiscal policies.
• Monetary policy faces a liquidity trap, and fiscal policy implementation has been ad hoc.

Purpose of the Study:

• To present a modified and extended framework for economic stabilization policies.
• To address the limitations of traditional demand-side policies in crisis mitigation.
• To integrate microeconomic and macroeconomic policy perspectives for enhanced economic resilience.

Main Methods:

• Literature review of traditional and crisis-specific economic policies.
• Analysis of policy responses during the COVID-19 pandemic.
• Development of an extended stabilization policy framework.

Main Results:

• Microeconomic supply-side measures are crucial for promoting entrepreneurship and knowledge upgrading.
• A coordinated approach aligning micro- and macro-level policies is essential.
• The proposed framework enhances potential for long-term economic growth.

Conclusions:

• Effective crisis management requires a shift beyond traditional demand-side policies.
• Integrating microeconomic supply-side initiatives strengthens economic restructuring and recovery.
• A coherent policy realignment fosters sustainable growth post-crisis.