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The April issue of the Knightian Uncertainty Dispatch is out. Each month, I curate four new papers + one essential on macroeconomics, finance, and forecasting under structural change and Knightian uncertainty.
This month's theme: what does it mean for monetary policy when the economy may be undergoing structural change?
The issue picks up where the March Dispatch and "The Quiet Revolution in Central Bank Forecasting" left off, and asks the deeper question that follows the institutional shift those pieces documented. Three implications follow from taking structural change seriously — large and systematic forecast errors (alignment between expectations and outcomes cannot be presumed), a coordination problem between central bank and market (the two parties may not share a model of the economy), and the need for robust policy across multiple scenarios rather than optimization given any single one.
The April 30 Bank of England Monetary Policy Report — published the day before this Dispatch — makes the institutional shift concrete. For the first time since fan charts were introduced in 1996, the Report publishes three illustrative scenarios with no designated central projection. Three of the four major Western central banks that previously published probabilistic forecasts have moved to scenario-based communication within six weeks of each other.
The four papers show senior central bankers explicitly recognizing each implication.
Tiff Macklem at the Bank of Canada defines structural change as "the transition between one steady state and the next" and names the cyclical/structural identification problem as the central forecasting challenge.
Huw Pill at the BoE Maxwell Fry Lecture argues that "in a world of radical uncertainty and deep structural economic change, more weight should be given to robust eternal verities" — and names the coordination problem explicitly.
Albuquerque et al.'s BoE Macro Technical Paper documents the operational machinery, including a distinction between alternate-shock and structural scenarios that exposes the paradox of representing structural change inside a constant-parameter model.
The April 30 BoE Monetary Policy Report drops the central projection entirely, with Pill dissenting on structural-change grounds in a vote that shows the coordination problem made visible inside the Committee.
This month's essential: Lucas (1976), "Econometric Policy Evaluation: A Critique" — the founding statement of the constant-parameter REH apparatus that descends through every central-bank DSGE in 2026. The argument: Lucas's framework works for the question Lucas asked — an announceable policy shift — but the same machinery applied to scenarios for unannounceable structural change is where the institutions are reaching beyond what the formal apparatus can support.
