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One-Sided Uncertainty about Future Fiscal Policy

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  • Daniel, Betty C

Abstract

This paper analyzes the implications of uncertainty regarding future policy rules. The model demonstrates that expansionary fiscal policy, which is expected to be reversed at an unknown future date, can be responsible for sustained exchange rate appreciation, accompanied by persistent rational expectations of depreciations. The predictions of the model are compared with recent U.S. experience. Copyright 1989 by Ohio State University Press.

Suggested Citation

  • Daniel, Betty C, 1989. "One-Sided Uncertainty about Future Fiscal Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(2), pages 176-189, May.
    • Handle: RePEc:mcb:jmoncb:v:21:y:1989:i:2:p:176-89
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    Cited by:

    1. Agenor, Pierre-Richard, 1995. "Monetary shocks and exchange rate dynamics with informal currency markets," International Review of Economics & Finance, Elsevier, vol. 4(3), pages 211-226.
    2. Zhou, Su, 2002. "The forward premium anomaly and the trend behavior of the exchange rates," Economics Letters, Elsevier, vol. 76(2), pages 273-279, July.
    3. Charles Engel & James D. Hamilton, 1989. "Long Swings in the Exchange Rate: Are they in the Data and Do Markets Know It?," NBER Working Papers 3165, National Bureau of Economic Research, Inc.
    4. Yohane Khamfula, 2006. "Fiscal uncertainty with donor herding and domestic debt crisis," Working Papers 07/2006, Stellenbosch University, Department of Economics.

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