We develop a model in which policy makers' reputation for Fiscal Virtue evolves over time. Fiscal Virtue is generally desirable because it leads to a stable macroeconomic environment, but when entering the zero lower bound, policy makers face a trade-off between preserving their reputation and...

This paper develops methods to study the evolution of agents' expectations and uncertainty in general equilibrium models. A central insight consists of recognizing that the evolution of agents' beliefs can be captured by defining a set of regimes that are characterized by the degree of agents'...

This paper studies a DSGE model with endogenous financial asset supply and ambiguity averse investors. An increase in uncertainty about financial conditions leads firms to substitute away from debt and reduce shareholder payout in bad times when measured risk premia are high. Regime shifts in...