2015, №3

Macroeconomic policy under uncertain fiscal policy preferences


This paper analyzes macroeconomic policy under uncertain fiscal policy preferences. We show that uncertain preferences of the government lead to more expansionary monetary policy and more contractionary fiscal policy. As a result, inflation bias is aggravated: expected inflation increases, while expected output drops. Nevertheless, if fiscal multiplier is certain, preference uncertainty does not matter anymore.

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Olga S. Kuznetsova – National Research University «Higher School of Economics», Researcher at the Laboratory of Macroeconomic Analysis (Moscow, Russian Federation; e-mail: okuznetsova@hse.ru).

Sergey A. Merzlyakov Cand. Sci. (Econ.), Associate Proffessor, Deputy Departmental Head, International Laboratory for Macroeconomic Analysis, Higher School of Economics (Moscow, Russian Federation; e-mail: smerzlyakov@hse.ru).