Davig, Troy A.; Foerster, Andrew T. - Federal Reserve Bank of Kansas City - 2014
Motivated by the US Fiscal Cliff in 2012, this paper considers the short- and longer- term impact of uncertainty … generated by fiscal policy. Empirical evidence shows increases in economic policy uncertainty lower investment and employment …. Investment that is longer-lived and subject to a longer planning horizon responds to policy uncertainty with a lag, while capital …