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How Does Uncertainty About Future Fiscal Policy Affect Current Macroeconomic Variables?

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  • Neil Rankin

Abstract

A macromodel is constructed based on risk-averse, dynamically-optimising, wage-setting households. The money is set one period in advance, so that randomness in future fiscal policy causes randomness in future output. The mechanism is through increasing the demand for money and thence the current interest rate. We suggest that such fiscal uncertainty is one possible cause of the current faltering of the economic recovery in Europe.

Suggested Citation

  • Neil Rankin, "undated". "How Does Uncertainty About Future Fiscal Policy Affect Current Macroeconomic Variables?," EPRU Working Paper Series 96-09, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  • Handle: RePEc:kud:epruwp:96-09
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    Cited by:

    1. Ramiro Rodríguez Revilla, 2011. "Modelos de equilibrio general dinámicos y estocásticos para Colombia 1995-2011," REVISTA ECOS DE ECONOMÍA, UNIVERSIDAD EAFIT, December.
    2. Brian Piper, 2014. "Factor-Specific Productivity," Working Papers 1401, Sam Houston State University, Department of Economics and International Business.
    3. Francesco Sergi, 2015. "L'histoire (faussement) naïve des modèles DSGE," Documents de travail du Centre d'Economie de la Sorbonne 15066, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    4. Francesco Sergi, 2015. "L'histoire (faussement) naïve des modèles DSGE," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01222798, HAL.

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