Economists must study ‘certainty shocks’ – Bundesbank paper
Policy-makers must distinguish between shocks which raise or lower certainty, researcher says
Shocks that increase economic certainty are as important as those that add to uncertainty, a working paper published by the Deutsche Bundesbank argues.
Yves Schüler says in The impact of uncertainty and certainty shocks that the econometric tools used to analyse the impact of major economic and political shocks currently do not distinguish between the two types. This failure seriously limits policy-makers’ understanding of the economy, he argues.
He presents a new approach to the problem
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