Optimal monetary policy under uncertainty leads to gradual economic recovery.
The article discusses how uncertainty about the effects of monetary policy affects optimal policy decisions. The researchers use a model to show that in the current situation, the US economy is facing a significant demand shock. They find that under uncertainty, it is better to have a more gradual response to shocks, rather than a quick one. This means that output and inflation levels will return to normal slowly. The study suggests that even with uncertainty, it is important for monetary policy to respond to shocks, and sometimes it is best to take a more moderate approach.