Robust Policy in Times of Pandemic

Abstract

The pandemic exposes policymakers to fundamental uncertainties about future economic scenarios. While policymakers have to act forcefully to mitigate the impact on the economy, these conditions call for policy strategies that are also robust to uncertainty. This article compares two concepts of robust strategies: robust control and robust satisficing. It argues that a robust satisficing strategy is preferred and shows that the crisis responses of governments and central banks in Europe share features of robust satisficing in several dimensions.