Commentary: Monetary and fiscal options in the event of a ‘No-Deal Brexit’
The prospect of leaving the European Union has acted to hamper much economic activity and the formulation of forward-looking plans over the past three years. The Institute has outlined the consequences arising from the various EU Exit scenarios that the UK may face, each of which will leave output lower than would otherwise have been the case (see figure 1 for our modelled exitpaths). Whilst our analysis, which is at the consensus of the academic and policy-related literature, outlines an economic loss from the likely path of output on EU Exit there are a number of possible responses to be considered when setting monetary and fiscal policy. The question of impact and response is particularly heightened in the event of a so-called ‘No-Deal Brexit’, in which trading relations with the EU and, by default, with the rest of the world will no longer pivot around membership of the EU and will depend in the first instance on WTO rules.
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