Question 13

On Feb 24th, the Vix index, a measure of expected volatility in the S&P500, rose markedly above its long-run average, indicating market stress and a signal that investors believe that uncertainty will continue. Concern about the global fallout from the conflict in Ukraine has heightened jitters among investors. (i) Discuss the possible effects on heightened uncertainty on household behaviour. (ii) Discuss if this could it have an effect on macroeconomic outcomes?

[60 marks]