Uncertainty and macroeconomics: transmission channels and policy implications

There has been a strong focus in recent policy debates on the various types of uncertainty surrounding the global economy, from economic policy uncertainty to financial volatility. This Rue de la Banque presents the key challenges raised by this phenomenon of uncertainty. How to measure uncertainty? Through which channels does uncertainty impact the economy? What are the implications of uncertainty for policy makers? We draw three lessons for policy makers facing increasing uncertainties. First, macroeconomic policies have a direct role to play in stabilizing policy-related uncertainty. Second, financial uncertainty should be constrained through financial regulation. Third, the effectiveness of economic stabilisation policies depends on the state of uncertainty and should be adapted accordingly.