Fiscal And Monetary Interaction Under Monetary Policy Uncertainty

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Executive Summary

Despite the increasing number of studies on monetary policy uncertainty, its role on the strategic interaction between fiscal and monetary policies has not been fully explored. The authors' paper aims to fill this gap by evaluating the consequences produced by multiplicative uncertainty in such a context. Nowadays one of the most important challenges for policymakers, in particular monetary authorities, is how to deal with uncertainty (Lane, 2003). In a public speech, Alan Greenspan (2003) observed that "Uncertainty is not just an important feature of the monetary policy landscape; it is the defining characteristic of that landscape."

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