Endogenous and exogenous uncertainty

Households, companies and governments are used to dealing with endogenous uncertainty, which is related to how economies function. This uncertainty relates, for example, to the length of expansionary periods, the occurrence of financial crises, monetary policies, etc. However, there is now an exogenous uncertainty that is due to external factors: geopolitical crises (e.g. Donald Trump's customs duties), health crises (COVID). In essence, exogenous uncertainty is worse than endogenous uncertainty since it is impossible to predict the corresponding events, and since there are no signals that announce them in advance. When uncertainty turns from endogenous to exogenous uncertainty, precautionary behaviour (increased savings, lower investment, building up of cash reserves, etc.) is therefore likely to become even more powerful, thereby weakening the economy further.