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Identifier to cite or link to this item: https://hdl.handle.net/10086/29082

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Title
Fiscal Forward Guidance:A Case for Selective Transparency
Creator
Creator Name
Fujiwara, Ippei Fujiwara, Ippei
Affiliation
Affiliation Name
Keio University
Affiliation
Affiliation Name
ANU
Creator Name
Waki, Yuichiro Waki, Yuichiro
Affiliation
Affiliation Name
University of Queensland
Editor
Contributor Name
Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University
Key Word
news shock
fiscal policy
private information
communication
forward guidance
JEL
D82
E62
H20
E30
Abstract
Should the fiscal authority use forward guidance to reduce future policy uncertainty perceived by private agents? Using dynamic general equilibrium models, we examine the welfare effects of announcing future fiscal policy shocks and show that selective transparency is desirable — announcing future policy shocks that are distortionary can be detrimental to ex ante social welfare, whereas announcing non-distortionary shocks generally improves welfare. Sizable welfare gains are found with constructive ambiguity regarding the timing of a tax increase in a realistic fiscal consolidation scenario. However, being secretive about distortionary shocks is time inconsistent, and welfare loss from communication may be unavoidable.
Publisher
Institute of Economic Research, Hitotsubashi University
Issued Date
2018-03
Language
English(eng)
Resource Type
technical report
Version Type
VoR
Is Part OfRelation -
Related Title
CEI Working Paper Series, No. 2017-8
Relation
Related Identifier
URI
  http://cei.ier.hit-u.ac.jp/English/index.html
Number of Pages
47
Appears in Collections
CEI Working Paper Series
URL
https://hdl.handle.net/10086/29082