Gandrud, Christopher
(2012)
Knowing the unknowns: financial policymaking in uncertainty.
PhD thesis, London School of Economics and Political Science.
Abstract
How do policymakers make decisions during financial market uncertainty? I develop a straightforward
framework of policymaking in uncertainty. To overcome uncertainty, policymakers gather information using
strategies discussed across a variety of political science disciplines. Policymakers need information to be able
to make goal-oriented decisions. The information strategies actors choose are conditioned on the uncertainty
problems they face. In turn, the information they receive impacts their policy decisions. My three empirical
papers investigate what strategies are likely to be chosen in different types of uncertainty and how these
choices affect policy decisions. My first paper, co-written with Mícheál O’Keeffe, develops a signaling game
that policymakers play when they perceive data uncertainty, i.e. uncertainty about economic fundamentals.
The model is supported empirically with analytic narratives of recent crises in Korea and Ireland. My
following two papers deal with situations of increasing causal uncertainty, i.e. uncertainty about how actions
cause outcomes. In both of these papers I use Multi-state Event History Analysis. I find that when there
is high causal uncertainty policymakers tend to use learning strategies that start with international-level
policy recommendations. These recommendations are then updated with the experiences of regional peers
who have adopted them. Beyond creating and finding evidence for a parsimonious framework of decisionmaking in uncertainty, I make a number of other contributions to political economy. I extend the empirical
tools researchers can use to understand decisions in complex choice environments. I provide evidence that
making financial bureaucrats “independent" does not ensure positive outcomes. Specifically, it does not
guarantee that financial bureaucrats will provide accurate information needed for effective policymaking.
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