Learning about fiscal policy and the effects of policy uncertainty

Arbeitspapier

The recent crisis in the United States has often been associated with substantial amounts of policy uncertainty. In this paper we ask how uncertainty about fiscal policy affects the impact of fiscal policy changes on the economy when the government tries to counteract a deep recession. The agents in our model act as econometricians by estimating the policy rules for the different fiscal policy instruments, which include distortionary tax rates. Comparing the outcomes in our model to those under full-information rational expectations, we find that assuming that agents are not instantaneously aware of the new fiscal policy regime (or policy rule) in place leads to substantially more volatility in the short run and persistent differences in average outcomes.

Object Details

• ISBN: 978-3-86558-991-0
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bundesbank Discussion Paper ; No. 51/2013

Classification and Topics

• Classification: Wirtschaft ; Business Fluctuations; Cycles ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness ; Fiscal Policy
• Subject: DSGE ; Fiscal Policy ; Learning

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hollmayr, Josef ; Matthes, Christian
• Event: Veröffentlichung
• (who): Deutsche Bundesbank
• (where): Frankfurt a. M.
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/88438
• Last update: 10.03.2025, 11:43 AM CET