Despite the recent increasing number of studies on monetary policy uncertainty, its role on the strategic interactions between fiscal and monetary policies has not been fully explored. Our paper aims to fill this gap by tackling this issue by evaluating the consequences produced by...

The theoretical literature on business cycles predicts a positive investment response to productivity improvements, a prediction we question from theoretical and empirical perspectives. We show that a short-term negative response of investment to a positive technology shock is consistent with a...

The theoretical literature on business cycles predicts positive factor inputs responses to productivity shocks. In this work we argue that, once conditional correlations are taken into account, hours worked and investment decline temporarily following a positive technology shock. First, we...

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...

This paper analyzes the behavior of a central bank under strong (quot;Knightianquot;) uncertainty when the short run trade-off between output and inflation is represented by the Sticky Information Phillips Curve proposed by Mankiw and Reis (2002). By solving the robust control problem...