Optimal fiscal policy with robust control

DOI10.1016/J.JEDC.2011.08.013MaRDI QIDQ433644zbMATH OpenOpenAlexFDO

Authors Justin Svec

Publication date 5 July 2012

Published in Journal of Economic Dynamics and Control (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/j.jedc.2011.08.013

zbMATH Keywords

debtrobust controltaxesuncertainty

Mathematics Subject Classification ID

Economic dynamics (91B55) Model systems in control theory (93C99)

Review text

The paper analyses the impact of consumer uncertainty on optimal fiscal policy in the Lucas and Stokey (1983) framework.NEWLINENEWLINEIt is found that if the government is confident that the approximating probability model characterizes the stochastic environment that this government relies less heavily on labor taxes to absorb the fiscal shock than would be optimal if consumers were fully confident in their probability model. This policy helps mitigate the direct welfare cost associated with consumer uncertainty.

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Cites work

• Methods for robust control
• On the robustness of Laissez-Faire
• Recent developments in modeling preferences: Uncertainty and ambiguity
• Recursive robust estimation and control without commitment
• Risk, ambiguity and the Savage axioms
• Robust control and model misspecification
• Robust estimation and control under commitment

Cited in

(5)

• Model uncertainty and intertemporal tax smoothing
• scientific article; zbMATH DE number 4164515 (Why is no real title available?)
• scientific article; zbMATH DE number 1264474 (Why is no real title available?)
• scientific article; zbMATH DE number 1086766 (Why is no real title available?)
• Doubts about the model and optimal policy

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