What is the nature of “unconventional fiscal policy?”

The economic literature 1 has recently recommended that the appearance of deflationary pressures be met not only by an unconventional monetary policy, but also an “unconventional fiscal policy”. It consists in a gradual and pre-announced increase in VAT. It is expected to lead to: An increase in demand on the back of an acceleration in consumption; An increase in expected and actual inflation and therefore a fall in real interest rates; A fall in the fiscal deficit, or the possibility to cut direct taxes. But this kind of policy seems dangerous: households fac ing a liquidity constraint cannot manage their consumption intertemporally, so the increase in VAT and therefore in prices would lead to a fall and not an increase in their consumption in the short term. We examine the effect of the pre-announced VAT hikes in Japan. 1 M. Lemoine, J. Lind é , “Fiscal Stimulus in Liquidity Traps: Conventional or Unconventional Policies?”, CEPR Discussion Paper 15623, December 2020 I. Correia, E. Farhi, J. P. Nicolini, P. Teles (2013), “Unconventional Fiscal Policy at the Zero Bound”, American Economic Review, vol. 103, n o. 4 F. D’Acunto, D. Hoang, M. Weber (2018), “Unconventional Fiscal Policy”, American Economic Review, Papers and Proceedings, vol. 108, n o. 5