This paper develops a model of policy regime uncertainty and its consequences for stabilizing expectations. Because of learning dynamics, uncertainty about monetary and fiscal policy is shown to restrict, relative to a rational expectations analysis, the set of policies consistent with...

We analyze fiscal consolidations using a New Keynesian model where agents have heterogeneous expectations and are uncertain about the composition of consolidations. We look at spending-based and tax-based consolidations and analyze their effects separately. We find that the effects of...