This paper investigates how monetary-policy rules and expectations formation influence the setting of fiscal policy in the presence of uncertainty. The analysis is couched in a stochastic-simulation framework wherein the monetary authority seeks to control inflation while the fiscal authority...

This paper investigates how parameter uncertainty affects the ability of the fiscal authority to attain its policy objectives. Our analysis is couched within a stochastic simulation framework wherein the fiscal authority seeks to control fluctuations in the debt / GDP ratio. The fiscal authority...