Fed research models optimal monetary and fiscal policy under uncertainty
Research published by the Federal Reserve has attempted to improve on previous models of optimal policy-making by moving from a deterministic to an uncertain world and studying both fiscal and monetary policy.
Taisuke Nakata, author of the discussion paper Optimal Fiscal and Monetary Policy with Occasionally Binding Zero Bound Constraints, says the paper is the first to include both fiscal and monetary policy in combination with uncertainty. The paper uses a New Keynesian model with a stochastic
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