Policymakers' choices dominate headlines in the global crisis. This column distinguishes between economic uncertainty and economic policy uncertainty, constructs an index to measure policy-related uncertainty, and argues that improving policy uncertainty would create millions of US jobs.
The most striking thing about recent stock-market volatility is that politicians are making the news. Policymaker actions and statements about bailouts, budgets and regulatory reforms are driving the stock-market gyrations (Calvo 2009).
This is not normal. Before the financial crisis of 2008, the stock market usually moved in response to economic news. Strong GDP and employment figures would send the markets soaring. Poor corporate earnings would send the markets crashing.
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