Abstract
Abstract In the aftermath of the UK referendum on June 23rd, 2016 that resulted in a sonorous negative decision regarding the willingness of the British people to remain in the EU, a significant number of alarming questions have emerged. Although Europe should have forged in crises, nowadays, many compromises have to be made in order to maintain the European construction as intact as possible. The question we attempt to answer is whether a new phase of unconventional monetary policy in the form of QE would be appropriate to lessen the threat of an upcoming crisis. This is why we examine Eurozone QE perspectives through the prism of the new EU era without the UK in order to highlight the pros and cons of the historical Brexit decision. As new rounds of unconventional monetary policy are believed to be essential for supporting the weaker countries in the European south, perspectives of non-conventional success could alter and optimal policies be substantially reformulated subject to the newly-arising constraints. Based on the main scenarios about the UK’s relations to the European Union in the near future, we estimate how a new round of non-conventional measures could affect the Britons as well as the European citizens. Moreover, we try to assess the viability of each of these outcomes through the spectrum of a monetary-driven decision-making.
Highlights
There is a growing tendency among economic agents to argue that harsh economic shocks - such as the result of the recent referendum in the UK that is taking Britain out of the European Union (EU) - render unconventional monetary policies more necessary than before
Some others believe that Brexit may give the EU the opportunity to increase its coherence since the UK was always between the European and Anglo-Saxon road and they argued that sometime in the future, which is the British would decide to choose sides
6 http://www.voxeu.org/article/life-after-brexit-uk-s-options-outside-eu 7 Helicopter money is referred to a policy where a government prints money to try to spur growth and get inflation higher
Summary
There is a growing tendency among economic agents to argue that harsh economic shocks - such as the result of the recent referendum in the UK that is taking Britain out of the European Union (EU) - render unconventional monetary policies more necessary than before. The sterling devaluation as a consequence of Brexit has nothing to do with a reduced intrinsic value in the current fiat money environment, but with a lower credibility on the part of British authorities This is derived from the surge in unreliability of the latter, as exiting the EU forms a major step back, and this decision has induced a great level of extra volatility in the UK financial market. Expressed, profit made due to the Brexit-caused exchange rate movements has a high probability of not being reinvested on a low price - high quality policy A significant example is the UK corporate pension deficit that has widened by £80 million overnight (that is 10 times the annual EU budget contribution)
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