| Impact of uncertainty on growth | Impact of growth on uncertainty | ||
| Positive link | Negative link | Positive link | Negative link |
| Black [20]: BC hypothesis, positive trade-off between risk and return underlying the choice of aggregate technologies, Sandmo [21]: Positive impact of uncertainty about future income on the equilibrium rate of economic growth through higher savings (precautionary savings motive) and higher investment (Solow [22]), Blackburn [4]: Imperfectly competitive, stochastic economy, learning-by-doing technology, positive impact of BC volatility on long-run growth through technological progress, Andreou [23]: Learning-by-doing stochastic monetary model, positive impact of output volatility on growth | Keynes [24]: Negative impact of variation in economic activity on investment and output growth through riskier returns to investment, Bernanke [25] and Pindyck [26]: Investment and hence growth are depressed by forms of risk and uncertainty via the irreversibility feature of investment, Ramey and Ramey [27]: Lower output through greater volatility due to ex-post inefficiencies in production technologies and ex-ante technology commitments, Blackburn and Pelloni [28]1: Stochastic monetary growth model, negative link irrespective of the type of shock | Brunner [30]: Monetary authorities respond to increased growth, leading to falling uncertainty with reference to future inflation due to lower inflation, and hence, real uncertainty increases via reduced nominal uncertainty (Taylor effect). | Fountas et al. [31]: Effect of growth on its uncertainty depends on the interaction of three effects, the “Philipps-curve”, the Friedman and the Taylor effects. Increase in growth may lead to more inflation (short-run Philipps-curve effect, Fountas and Karanasos [6]), to an increase in inflation uncertainty (Friedman [32]) and via an assumed trade-off between inflation variability and output variability (second-order Philipps-curve effect, Taylor [33]) to a fall in real uncertainty. |