2024-03-042024-03-042018-05https://hdl.handle.net/2346/97680This dissertation examines the effects of informational frictions on fiscal and monetary policies. The first chapter explores optimal fiscal and monetary policy with sticky information in the production sector. Labor income tax rate smoothing over the business cycle is a key result in the optimal fiscal policy literature. This first chapter studies the optimality of tax smoothing in a model with sticky information in the production sector, and compares the dynamic responses of the economy to government spending and technology shocks under both sticky information and sticky prices. The main finding of first chapter is that the introduction of information stickiness causes large fluctuations in the labor income tax rate even if prices are fully flexible; therefore, full smoothing of the labor income tax rate is not optimal. On the other hand, when the degree of information stickiness increases, the volatility of inflation declines. These findings reflect the observation that, in the sticky information model, the cost of obtaining and processing the information makes firms inattentive, which in turn induces stickiness in the behavior of inflation. I also show that a government spending shock generates less volatility in the main variables under sticky information than in sticky price model. In the second chapter, I study monetary policy rules in the presence of fiscal uncertainty. I develop a model with informational frictions on the government spending in the context of dynamic stochastic general equilibrium (DSGE) framework and investigate its implications for economic dynamics and monetary policy rules. The effects of government spending shock and noise shock on the selected macroeconomic variables were compared under three monetary policy rules: Taylor rule, strong response to inflation rule and inflation targeting rule. I find that persistency of the government spending shock long lasting more than noise shock under Taylor rule, because it is a real and more anticipated shock. On the other hand, noise shock takes shorter time for agents to realize that it is just a noise and lasts no longer. The results show that selected macroeconomic variables under three policy rules behave similarly to noise shock and government spending shock. It is also determined that the inflation targeting rule generates the most desirable results and plays a successful role in stabilizing the economy.Application/pdfenfiscal policyinformational frictionsmonetary economicsDissertationRestricted until 03/2023.