A notable attribute of the empirical studies on monetary rules is that few published articles rely normative evaluation in eliminating unwanted economic uncertainty. To prevail over this shortcoming, paper introduces optimal mitigation uncertainty and determines its applicability through a sample 14 selected countries. Using combination theoretically derived with estimations leads to specific r...

Abstract We study the impact of economic policy uncertainty on term structure nominal interest rates. In a general equilibrium model populated by an averse agent, we show that political not only affects yield curve and corresponding volatility but also bond risk premia carry premium for uncertainty. Our simultaneously captures both shape hump volatilities, stylized feature is hard to match with...

This study develops a new economic uncertainty (EU) index based on Chinese newspapers to address the media coverage bias of existing measures. We investigate how EU affects China’s macroeconomy. Our results suggest that reduces aggregate output. find predicts fluctuations in activity and actual also EU, but nonlinearly. Furthermore, we show United States leads China, implying negative economy i...

The literature regarding cultural background change points out that changes in can only be slow moving. However, under high uncertainty levels, may the short or medium term as well. In this paper, effects of on behaviors are investigated. Cultural is captured through Schwartz’s values, based waves provided by European Social Survey from 2002 up to 2018, performing relative Principal Component A...

The paper's primary finding reveals that there are three factors related to the level of Bolivian economic uncertainty. These were interpreted as: i) uncertainty expectations; ii) monetary and exchange rate policy; iii) political social contribution each factor was found account for approximately one-third total uncertainty; however, due incidence searches, in policy showed greater contemporane...

Model-based economic optimization of oil production suffers from high levels of uncertainty. The limited knowledge of reservoir model parameters and varying economic conditions are the main contributors of uncertainty. The negative impact of these uncertainties on production strategy increases and becomes profound with time. In this work, a multi-objective optimization problem is formulated whi...

This paper uses insights from decision theory under uncertainty to explore research challenges in climate economics. We embrace a broad perspective of uncertainty with three components: risk (probabilities assigned by a given model), ambiguity (level of confidence in alternative models), and misspecification (potential shortfalls in existing models). We survey recent climate science research th...

We document that fear about misspecified economic and central bank policies explain 45% of variations in bond option implied volatilities and interest rate volatilities. We endogenize this empirical pattern with a parsimonious equilibrium asset pricing model. In equilibrium, volatility is endogenously driven by fear of not knowing the data generating process that drives future economic and futu...

Asset pricing theory has long recognized that financial markets compensate investors who are exposed to some components of uncertainty. This is where macroeconomics comes into play. The economy-wide shocks, the primary concern of macroeconomists, by their nature are not diversifiable. Exposures to these shocks cannot be averaged out with exposures to other shocks. Thus, returns on assets that d...

S ince the early days of probability theory, there has been a distinction between probabilities that are given, as in a game of chance, and probabilities that are not given, but reflect a subjective degree of belief; Hacking (1975) and Shafer (1978) offer historical surveys. In economics, Knight (1921) is typically credited with the distinction between situations of “risk” and of “uncertainty.”...