Exchange rate pass-through
Gerstein and al. find that:
- The outcome of the Brexit referendum resulted in a period of relatively persistent increased inflation;
- About two-thirds of the inflation pickup in Brexit’s wake can be attributed to the increase in the prices of tradable goods;
- This exchange rate pass-through effect came into full effect months after the initial shock and lasted for at least a year afterward.
The Brexit Price Spike
By: Neil Gerstein, Bart Hobijn, Fernanda Nechio, Adam Shapiro – Federal Reserve of San Francisco
The US-UK free trade agreement
Claude Barfield argues that the prospects for a UK-US free trade agreement are grim:
- If Boris Johnson makes good on his promise to “crash out” of the EU even without any terms of separation, the resulting disorder and chaos will render any serious negotiations impossible for the British government;
- Any move toward a “softer” Brexit would inevitably complicate and vitiate negotiations with the US as many EU social, environmental, and safety regulations are at odds with US standards and procedures;
- There is the reality of a rapidly shifting trade policy environment in the US. The Democrats now control the House of Representatives and, as seen in the USMCA negotiations, are demanding substantial changes in trade agreements.
The US-UK free trade agreement: Not so fast
By: Claude Barfield – American Enterprise Institute
The EU-UK global value chains (GVC)
In this paper we highlight the features of GVC-trade between the EU and the UK, disentangling the complex network of bilateral EU-UK value added flows. Assuming that following Brexit the UK adopts the same Most Favoured-Nation tariff schedule as the EU, we compute the direct and indirect costs of these tariffs, taking into account the EU-UK GVC-trade patterns. Tariffs would add almost 1 percentage point to the cost of manufacturing inputs in the UK, while the corresponding input cost in the EU would be only marginally affected, despite some heterogeneity at the country-level.
EU-UK global value chain trade and the indirect costs of Brexit
Authors: Rita Cappariello, Milan Damjanovic, Michele Mancini, Filippo Vergara Caffarelli
From: Bank of Italy, Bank of Slovenia
