With respect to monetary policy, this refers to the fact that “true” relationships between – the price level, – monetary policy measures and – exogenous shocks, such as, in particular, unexpected changes in foreign trade prices, exchange rates, new technologies and policy-institutional frameworks, can neither be accurately captured nor even estimated in advance. Moreover, the structural relationships between exogenous shocks, monetary policy measures and central bank variables change over time. – Even empirical models cannot eliminate this uncertainty, because they only ever capture laws and behavior that applied in a past period. – See instructions, monetary, targeting, fine-tuning, monetary policy, forward-looking, data uncertainty, oil prices, hurricane shocks, model uncertainty, risk, systemic, shocks, structural, thrift rule, structural upheaval, structural change, trend forecasts, distribution, stable. – Cf. Monthly Report of the Deutsche Bundesbank of June 2004, pp. 15 et seq., Monthly Report of the Deutsche Bundesbank of September 2013, pp. 69 et seq. (workshop report outlining issues arising in forecasting models; references).
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
https://www.jung-stilling-gesellschaft.de/merk/
https://www.gerhardmerk.de/