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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.
Study by: Austrian Institute of Economic Research
Commissioned by: European Parliament, Committee on Economic and Monetary Affairs
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.
JEL-Codes:E20, E32, E58, G15, F45
Keywords:Uncertainty; COVID-19; Monetary Policy; Inflation; Inflation target
Research group:Macroeconomics and European Economic Policy

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