Implied Volatility and Policy Uncertainty

Okay
Just a little pinprick
There'll be no more aaahhh
But you may feel a little sick
--Pink Floyd

Chart shows relationship between VIX and Baker et al's Policy Uncertainty Index over time.

The VIX is a measure of 'implied volatility' which can be viewed as a proxy for market-related uncertainty.

A widening gap is evident--one that began around 2000.

One possible interpretation: increasingly aggressive monetary policy is making investors comfortably numb to uncertainty happening in the larger world.