This document was provided by the Policy Department for Economic, Scientific and Quality of Life Policies at the request of
the committee on Economic and Monetary Affairs (ECON) ahead of the Monetary Dialogue with the ECB President on 19 November
2020.
Commissioned by: European Parliament
Study by: Austrian Institute of Economic Research – Hertie School gGmbH – Queen Mary University of London – German Institute for Economic Research
Online since: 13.01.2021 0:00
Uncertainty – a state in which assessing future conditions by economic agents is hampered – rose sharply during the current
pandemic. A bout of uncertainty can have similar effects like an adverse demand shock, dampening private consumption, investment
and, hence, inflation. According to our own estimations, however, the pandemic-induced spike of uncertainty has caused little
macroeconomic damage so far. The introduction of PEPP was a quick and decisive action that stopped uncertainty from rising
further and probably contained its adverse economic effects.