Managing pessimistic expectations and fiscal policy

Artikel

This paper studies the design of optimal fiscal policy when a government that fully trusts the probability model of government expenditures faces a fearful public that forms pessimistic expectations. We identify two forces that shape our results. On the one hand, the government has an incentive to concentrate tax distortions on events that it considers unlikely relative to the pessimistic public. On the other hand, the endogeneity of the public's expectations gives rise to a novel motive for expectation management that aims towards the manipulation of equilibrium prices of government debt in a favorable way. These motives typically act in opposite directions and induce persistence to the optimal allocation and the tax rate.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Journal: Theoretical Economics ; ISSN: 1555-7561 ; Volume: 8 ; Year: 2013 ; Issue: 1 ; Pages: 193-231 ; New Haven, CT: The Econometric Society

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Information, Knowledge, and Uncertainty: General ; Fiscal Policy ; Taxation and Subsidies: Efficiency; Optimal Taxation ; National Debt; Debt Management; Sovereign Debt
• Thema: Fiscal policy ; misspecification ; robustness ; taxes ; debt ; martingale

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Karantounias, Anastasios G.
• Ereignis: Veröffentlichung
• (wer): The Econometric Society
• (wo): New Haven, CT
• (wann): 2013

Weitere Informationen

• DOI: doi:10.3982/TE899
• Handle: http://hdl.handle.net/10419/150189
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ