We consider the estimation of a random level shift model for which the series of interest is the sum of a short memory process and a jump or level shift component. For the latter component, we specify the commonly used simple mixture model such that the component is the cumulative sum of a...

The idea that monetary policy is principally about "managing expectations" has taken hold in central banks around the world. Discussions of expectations management by central bankers, academics and by financial market participants frequently also include the idea that central bank credibility is...

This paper considers a reputation model of optimal taxation in which the public is unsure about the government type. A long-lived government can be trustworthy (meaning that it commits to its announced tax rate) or opportunistic (meaning that it retains the ability to change its tax rate after...

switch. Instead, policy should anticipate switches with small permanent tax cuts to extend "optimism" and severe transitory tax cuts to break "pessimism." These tax cuts should be reverted once a switch is triggered, when policy must focus on its short run objectives.