Falls in uncertainty may warn of coming crises – Bundesbank paper

Deutsche Bundesbank headquarters, Frankfurt
The Deutsche Bundesbank
Fabian Stürtz

Declines in economic uncertainty may be an early indicator of coming trouble in the financial sector, a working paper published by the Deutsche Bundesbank says.

In Uncertainty shocks and financial crisis indicators, Nikolay Hristov and Markus Roth note a paradox in the treatment of economic uncertainty.

A lot of research, they observe, shows that low uncertainty tends to lead to high investment or economic growth. But some theory suggests that “prolonged periods of low levels of uncertainty

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