Managing pessimistic expectations and fiscal policy
研究了当政府信任支出概率模型而公众形成悲观预期时，最优财政政策的设计，发现政府会利用税收扭曲集中在其认为低概率的事件上，并通过管理预期来操纵债务价格，两种动机方向相反，导致最优配置和税率具有持续性。
This paper studies the design of optimal fiscal policy when a government that fully trusts the probability model of government expenditures faces a fearful public that forms pessimistic expectations. We identify two forces that shape our results. On the one hand, the government has an incentive to concentrate tax distortions on events that it considers unlikely relative to the pessimistic public. On the other hand, the endogeneity of the public's expectations gives rise to a novel motive for expectation management that aims towards the manipulation of equilibrium prices of government debt in a favorable way. These motives typically act in opposite directions and induce persistence to the optimal allocation and the tax rate.