IMF
Economic uncertainty, while harder to measure than traditional indicators, can have significant impacts on financial stability. Tools like the Economic Policy Uncertainty Index and discrepancies between forecasts and actual data help track uncertainty.
Elevated uncertainty—due to inflation, geopolitical tensions, or climate disasters—can delay investment, tighten credit, and heighten financial market risks.
A disconnect between economic uncertainty and low market volatility can lead to sudden shocks, affecting growth and asset prices.
Policymakers must enhance credibility, adopt clear communication frameworks, and apply macroprudential policies to manage debt vulnerabilities and mitigate cross-border financial contagion.
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