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Coordination of Expectations and the Informational Role of Policy

Author

Listed:
  • Ernesto Pasten

    (Toulouse School of Economics)

  • Yang K. Lu

    (European University Institute and Hong Kong UST)

Abstract

switch. Instead, policy should anticipate switches with small permanent tax cuts to extend "optimism" and severe transitory tax cuts to break "pessimism." These tax cuts should be reverted once a switch is triggered, when policy must focus on its short run objectives.

Suggested Citation

  • Ernesto Pasten & Yang K. Lu, 2010. "Coordination of Expectations and the Informational Role of Policy," 2010 Meeting Papers 985, Society for Economic Dynamics.
  • Handle: RePEc:red:sed010:985
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