Fiscal Austerity in Ambiguous Times

• 成果类型: Article
• 署名作者: Ferriere, Axelle; Karantounias, Anastasios G.
• 署名单位: Paris School of Economics; Federal Reserve System - USA; Federal Reserve Bank - Atlanta
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MACROECONOMICS
• ISSN/ISSBN: 1945-7707
• DOI: 10.1257/mac.20160085
• 发表日期: 2019
• 页码: 89-131
• 关键词: uncertainty; expectations; consumption; utility; doubts; shocks; POLICY; RISK

摘要

This paper analyzes optimal fiscal policy with ambiguity aversion and endogenous government spending. We show that without ambiguity, optimal surplus-to-output ratios are acyclical and that there is no rationale for either reduction or further accumulation of public debt. In contrast, ambiguity about the cycle can generate optimally policies that resemble austerity measures. Optimal policy prescribes higher taxes in adverse times and front-loaded fiscal consolidations that lead to a balanced primary budget in the long run. This is the case when interest rates are sufficiently responsive to cyclical shocks, that is, when the intertemporal elasticity of substitution is sufficiently low.