Speculation is a favourite pastime of economists, but itÕs one that has lost much of its attraction since September 11, The Economist is reporting this morning. Working out what the global economic impact of the terrorist attacks in New York and Washington might be is peculiarly difficult because of their unprecedented nature. It is also, for many of those who work closely with the financial markets, unusually stressful. The attack in New York struck, as it was presumably meant to, at the financial heart of America. The casualty list is full of people who worked in the financial-services sector, giving the job of assessing its impact a personal dimension which hardheaded market people are not used to.

So many institutions have been affected by the damage to offices and communications wrought by the collapse of the World Trade Centre and by the large number of human casualties, that no one knows how the markets will operate. Share prices might slide sharply, continuing the slump, which had started before September 11. Or there might be a temporary calm, reflecting some kind of “gentlemanÕs agreement” among financial institutions not to rock the boat as AmericaÕs financial sector struggles to regroup. Global anxiety about the American market reaction was reflected in sharp falls in Far Eastern markets and in Europe ahead of Wall Street’s opening.

The enormous short-term uncertainties are reflected in the wider economy. How will American consumers and businesses react to the catastrophic events? Once air services are operating something close to normal schedules, will people resume flying as before? Will shoppersÑthe backbone of the worldÕs largest economyÑdecide against making that trip to the mall? How will firms cope if retail therapy goes out of fashion? Is recession now inevitable? On the face of it, the economic implications are huge: and how America responds will, in turn, have important consequences for the rest of the world.

But it is important to remember three things. First is the extraordinary degree of uncertainty involved in making economic assessments right now. This makes any attempt at forecasting even more difficult than normal. Second is the importance of distinguishing between short-term responses and the longer-term impact. The immediate fallout seems bound to be negative: for several days, at least, people canÕt fly even if they want to; the emotional reaction to the unfolding tragedy in New York in particular, seems bound to discourage consumer spending. But life will eventually begin to return to normal for most people. The response over the medium-term will be far more important in determining the economic outlook.

Last, but perhaps most important, as things stand now, the economic impact of the terrorist attacks might be relatively small in the long term. Horst Kšhler, the managing director of the International Monetary Fund, said as much in a statement released on September 12th. But that will not stop the events being blamed if America, followed by the rest of the world, slides into recession.