Low-frequency fiscal uncertainty

• 成果类型: Article
• 署名作者: Han, Zhao
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2020.03.017
• 发表日期: 2021
• 关键词: State-dependent fiscal policy; incomplete information; Signal extraction; Expectation formation; Belief-driven fluctuations

摘要

Long-run fiscal levels, or synonymously, fiscal targets, are usually assumed to be known to households inside the economy. This paper investigates the effects of unknown fiscal targets in an incomplete information, anticipated utility (IIAU) environment. Slowly increasing transfer payments cause households to suspect time-varying targets, and misperceptions impact both their expectation formation and decision making. Perceived targets enter the IIAU model as nonlinear state variables, introducing state-dependent fiscal multipliers. The short-run stimulus effects of Trump's 2017 and Reagan's 1981 Tax Cuts are comparable and modest. The long-run effects of Trump's Tax Cuts worse off if transfers continue to increase. (C) 2020 Elsevier B.V. All rights reserved.