The Role of Government Intervention in Mitigating Economic Shocks

Abstract

Purpose: This study sought to explore the role of government intervention in mitigation economic shocks.

Methodology: The study adopted a desktop research methodology. Desk research refers to secondary data or that which can be collected without fieldwork. Desk research is basically involved in collecting data from existing resources hence it is often considered a low cost technique as compared to field research, as the main cost is involved in executive’s time, telephone charges and directories. Thus, the study relied on already published studies, reports and statistics. This secondary data was easily accessed through the online journals and library.

Findings: The findings reveal that there exists a contextual and methodological gap relating to the role of government intervention in mitigating economic shocks. Preliminary empirical review that government intervention plays a crucial role in stabilizing economies during periods of turbulence. Through an exploration of theories such as Keynesian economics, Monetarism, and New Classical Economics, it was found that a balanced approach utilizing both fiscal and monetary policies is effective in responding to economic challenges. Sector-specific impacts were also highlighted, showing that targeted government support, such as subsidies and effective regulation, can enhance resilience in sectors like manufacturing and energy. The study's findings suggest that policymakers should adopt evidence-based strategies to navigate economic uncertainties and promote sustainable growth and stability.

Unique Contribution to Theory, Practice and Policy: Keynesian Economics, Monetarism and the New Classical Economics model may be used to anchor future studies on the role of government intervention in mitigating economic shocks. The study made significant contributions by offering recommendations for policymakers and practitioners. It enhanced economic theory by synthesizing Keynesian economics, Monetarism, and New Classical Economics, providing insights into effective policy responses to economic crises. The study emphasized the importance of targeted government spending, a combination of monetary and fiscal policies, clear guidelines for bailouts, and building economic resilience through diversification and innovation. It also highlighted the need for stable regulatory frameworks, addressing inequality, and taking a holistic approach to policy-making. These recommendations have guided past policy decisions, helping to promote economic stability and resilience.

Keywords: Government Intervention, Economic Shocks, Keynesian Economics, Monetarism, Fiscal Policy, Monetary Policy