No. 978 - The many shades of uncertainty and monetary policy

Questioni di Economia e Finanza (Occasional papers)
by Elisa Guglielminetti, Alessandro Lin and Andrea Tiseno
November 2025
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This paper analyzes the role of uncertainty in the economy and its implications for monetary policy. It proposes a classification of different types of uncertainty and examines how they affect central bank decisions within models where agents lack perfect information or where relationships between economic variables are nonlinear.

With multiple sources of uncertainty affecting household and business decisions and expectations, monetary policy must balance various needs: to respond gradually to reduce the risk of errors, to keep inflation expectations aligned with the target, to limit economic vulnerability, and to support aggregate demand, which is negatively impacted by uncertainty.

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  1. 13 November 2025
    No. 978 - The many shades of uncertainty and monetary policy
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