Learning about fiscal policy and the effects of policy uncertainty

Josef Hollmayr and Christian Matthes

No 51/2013, Discussion Papers from Deutsche Bundesbank

Abstract: 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.

Keywords: DSGE; Fiscal Policy; Learning (search for similar items in EconPapers)
JEL-codes: D83 E32 E62 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-dge, nep-law, nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/88438/1/774081619.pdf (application/pdf)

Related works:
Journal Article: Learning about fiscal policy and the effects of policy uncertainty (2015)
Working Paper: Learning about fiscal policy and the effects of policy uncertainty (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:512013

Access Statistics for this paper

More papers in Discussion Papers from Deutsche Bundesbank Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().