The impact of uncertainty on tail risk in the Dutch economy
Measures of uncertainty have surged recently, especially following the announcements of trade tariffs by the US administration. Based on a Growth-at-Risk (GaR) model we show that elevated uncertainty is associated with heightened tail risks for the Dutch economy and financial system. High uncertainty affects the economy through real and financial channels. Our analysis indicates that elevated uncertainty in the current environment heightens the risk of adverse outcomes for GDP growth and inflation.
Gepubliceerd: 08 mei 2025
In addition to raising tail risks to GDP growth, elevated uncertainty also implies higher financial stability risks due to a greater probability of significant asset price drops. A well-capitalized banking sector helps to dampen the adverse financial stability effects of heightened uncertainty, while it is not necessarily associated with lower median economic growth.
Our analysis underscores the importance of maintaining current levels of capital to ensure a resilient financial sector capable of withstanding shocks. In today's environment of heightened uncertainty - driven largely by global factors - multilateral frameworks and institutions are essential for preserving financial stability.
The impact of uncertainty on tail risk in the Dutch economy
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