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Uncertainty in the Euro Area During the First Wave of the COVID-19 Pandemic
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.
Research group:Macroeconomics and Public Finance
Language:English