Robustpolicymakinginthefaceofsuddenstops

This paperconsiderstaxpoliciestodealwithSuddenStops–declinesinaggregate activitythataremagnifiedbyabindingcollateralconstraint–thatoccasionallyoccurin emergingmarketeconomies.Householdsand/orthegovernmentareassumedtoface model uncertaintyanddesirerobustnessagainstalternativemodels.Welfaregainsfrom optimaltaxationaresmallifthegovernmenttrustsitsmodelofhouseholdexpectations, whetherthoseexpectationsarealteredbymodeluncertaintyornot;incontrast,welfare lossesarelargeifthegovernmentisuncertainaboutthehousehold’sprobabilitymodel