“Mensch tracht, und Gott lacht” – what’s the best guidance on monetary policy?

David Miles 22 October 2014

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“Mensch tracht, und Gott lacht” is a Yiddish proverb – men plan and God laughs. Woody Allen puts the same thought this way: “If you want to make God laugh tell him about your plans”. Some people might see these words as a fitting epitaph for forward guidance on monetary policy. The Bank of England has certainly faced a good deal of criticism for the guidance that it has recently been giving, as has the Federal Reserve in the US.

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Topics:  Monetary policy

Tags:  forward guidance, unconventional monetary policy, monetary policy, Central Banks, central bank communication, interest rates, uncertainty

The value of variation in clinical practice under uncertainty

Charles F Manski 01 October 2014

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Commentators on delivery of healthcare regularly decry ‘unwarranted’ or ‘inappropriate’ variation in clinical practice and recommend uniform treatment of observationally similar patients. This recommendation, often expressed in clinical practice guidelines, is well-motivated if knowledge of treatment response is strong enough to determine optimal treatments. However, much patient care is delivered with substantial uncertainty.

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Topics:  Health economics

Tags:  health, healthcare, medicine, treatment, uncertainty, ambiguity, regret, diversification, learning

Lacklustre investment in the Eurozone: Is there a puzzle?

Marco Buti, Philipp Mohl 04 June 2014

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On the importance of investment for the Eurozone economy

According to the European Commission’s most recent forecast, real economic activity in the Eurozone is expected to recover at a moderate pace until 2015, and to remain significantly weaker than in the US (European Commission 2014a).

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Topics:  EU policies Macroeconomic policy

Tags:  eurozone, growth, European Commission, investment, uncertainty, structural reforms, Bankruptcy, Eurozone crisis, public investment, banking union, financial fragmentation

Does policy uncertainty reduce economic activity? Insights and evidence from large trade reforms

Kyle Handley, Nuno Limão 23 November 2013

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The impact of policy uncertainty on economic activity is an issue traditionally associated with developing countries. Since 2008, however, the spotlight has shifted. Governments’ responses to the Great Recession and the Eurozone crisis have raised considerable uncertainty about the future policies of advanced economies. Examples include the timing and size of financial bailouts, government expenditures, and the risk of sovereign-debt default. These crises have also heightened trade policy uncertainty.

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Topics:  International trade

Tags:  US, China, WTO, trade, uncertainty, Great Recession, Eurozone crisis

Journal quality and citations: Why economists should practice what they preach

Daniel Sgroi 11 November 2013

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The UK is about to enter into one of the most important academic ranking exercises in its history. The Research Excellence Framework (or REF), starting in 2014, will determine how money is divided between departments and how the UK perceives the quality of its own universities and departments. As part of this process, university-based research-active academics throughout the UK will soon be submitting work to the REF. There will be one panel for each discipline, each made up of a number of highly esteemed academics who will review the submissions.

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Topics:  Education

Tags:  higher education, uncertainty, academia, rankings, journals, Bayes’ rule

Reduced policy uncertainty and the Japanese economy

Masayuki Morikawa 02 November 2013

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While the effects of the 'three arrows' of the Japanese Abenomics policy mix – bold monetary easing, flexible fiscal policy, and the growth strategy –have attracted worldwide attention, reduced policy uncertainty is also expected to contribute to the country’s economic growth by stimulating long-term investments in the private sector.

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Topics:  Institutions and economics

Tags:  economic growth, Japan, uncertainty

Economic uncertainty and the effectiveness of monetary policy

Knut Are Aastveit, Gisle James Natvik, Sergio Sola 19 October 2013

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Since the onset of the “Great recession”, economists have struggled to explain why the recovery has been so slow, despite the many policy measures that have been passed to re-invigorate economic activity. One candidate explanation that several have pointed to, for instance Baker, Bloom, Davis and Van Reenen (2012), is economic uncertainty. The argument is that uncertainty is likely to induce cautious behaviour, as decisions made today are more likely to prove “wrong” in the future, in which case they will have to be reversed at some cost.

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Topics:  Monetary policy

Tags:  monetary policy, uncertainty, Great Recession

Facing up to uncertainty in climate-change economics

Geoffrey Heal, Antony Millner 13 June 2013

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Uncertainty is intrinsic in climate change economics. We know that increases in greenhouse gas concentrations are causing shifts in the climate, but not precisely how large these shifts will be, nor when and where they will occur. Neither do we understand fully the social and economic consequences of these changes, or the options that will be available for coping with them in the future. Characterising our knowledge of these uncertainties, and finding decision tools that are appropriate to our state of knowledge, is a vital part of sensible evaluations of climate-policy options.

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Topics:  Environment

Tags:  climate change, uncertainty

Falling policy uncertainty is igniting the US recovery

Scott Baker, Nicholas Bloom 07 February 2012

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Because economic policy affects economic outcomes, policy uncertainty matters (Hallward-Driemeier and Pritchett 2010, Bloom 2009, and Bloom et al. 2007). Reading the business press, one gets the impression that the world of policy (taxation, regulation, fiscal stimulus, etc.) is in a very uncertain state in the US, Europe, Japan, and several of the biggest emerging markets. This has led to a debate over whether policy uncertainty is holding back the recovery (Mishel 2011).

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Topics:  Macroeconomic policy

Tags:  uncertainty, US recovery, policy

Growth from international capital flows: The role of volatility regimes

Ashoka Mody, Antu Panini Murshid 27 November 2011

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In a recent survey, Kose et al (2006) find little robust evidence for long-run growth benefits from global capital inflows. Prasad et al (2006) go a step further. They argue that developing countries grow faster when they rely less on foreign capital, as suggested by a positive relationship between current-account surpluses (capital outflows) and average growth (Figure 1).

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Topics:  International finance International trade

Tags:  volatility, capital flows, uncertainty

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