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Determine the term Uncertainty - Policy process
We know that uncertainty is one of main influencing factor in policy process and especially in coordination of economic policies. With government's using different models they may be unable to agree on the most appropriate agreement, and negotiations may break down. This may involve two separate aspects. First, governments may view all the available models as being essentially plausible, and so base their policy proposals on some weighted average of their forecasts. Second, they may actively seek to learn which model, if any is true. This will involve governments updating their beliefs about the true economic model using their observations of macroeconomic variables. Given these responses to model uncertainty the performance of economies with coordinated, rather than uncoordinated, policies improves substantially. Indeed such arguments may actually reverse Frenkel and Rockett's conclusions and suggest that the case of cooperation is strengthened given the presence of model uncertainty.
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