learning about the nature of these deviations. Under constrained discretion, only short deviations occur, agents' uncertainty … about the macroeconomy remains contained, and welfare is high. However, if a deviation persists, uncertainty accelerates and … welfare declines. Announcing the future policy course raises uncertainty in the short run by revealing that active inflation …

.ation stabilization and agents face uncertainty about the nature of these deviations. When observing a deviation, agents conduct Bayesian … prompt return to the active regime, macroeconomic uncertainty is low, welfare is high. However, if a deviation persists …, agents.beliefs start drifting, uncertainty accelerates, and welfare declines. If the duration of the deviations is announced …

While high uncertainty is an inherent implication of the economy entering the zero lower bound, deflation is not …

.ation stabilization and agents face uncertainty about the nature of these deviations. When observing a deviation, agents conduct Bayesian … prompt return to the active regime, macroeconomic uncertainty is low, welfare is high. However, if a deviation persists …, agents.beliefs start drifting, uncertainty accelerates, and welfare declines. If the duration of the deviations is announced …

We show that policy uncertainty about how the rising public debt will be stabilized accounts for the lack of deflation … imbalances. We then show that a micro-founded model that features policy uncertainty accounts for these stylized facts. Finally …, we highlight that policy uncertainty arises at the zero lower bound because of a trade-off between mitigating the …