Bartolomeo, Giovanni Di; Manzo, Marco; Giuli, Francesco - Department of Economics, University of Crete - 2008
This paper extends a well-known macroeconomic stabilization game between monetary and fiscal authorities introduced by Dixit and Lambertini (American Economic Review, 93: 1522-1542) to multiplicative (policy) uncertainty. We find that even if fiscal and monetary authorities share a common output...