Narratives and risks: a quantitative toolkit to evaluate scenarios applied to the Middle East conflict
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Box from Economic Bulletin 7/2026 presenting a quantitative toolkit to assess the empirical plausibility of alternative scenarios around staff projections, by comparing the joint paths of GDP and inflation with historical patterns. Applied to the Middle East conflict scenarios in the September 2026 projections, the severe scenario is considerably less plausible than the milder or adverse ones.
Key points
- Plausibility index from 0 (no historical precedent) to 100 (as plausible as the baseline)
- Milder scenario: between 82 and 96; adverse scenario: between 56 and 85; the severe one, considerably less plausible
- Accounting for both temporal and cross-variable dependence changes the result: a flat-path scenario with severity similar to the adverse one scores almost 0
- It does not measure the probability of the narrated events, which remains a matter of policy judgement
Who is affected
Scenario analysis and ECB macroeconomic projections
Plain-language version
The ECB has built a tool to check whether its scenarios on how the Middle East conflict could hit the economy look like things that have happened before. The result: the milder and adverse scenarios are fairly believable, while the most severe one has far less precedent. It does not say what will happen, only how realistic the numbers are.
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Summary produced with artificial intelligence from the official publication. It may contain errors: always check the original document.
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