Brexit Economic Policy
Definition of Policy Problem
The move by the U.K to exit the European Union was considered a move that was designed to help the country gain the economic prosperity that it had enjoyed before joining the organization. Although different scholars and international firms such as the international monetary fund predicted increased challenges after the exit both to the E.U and to Britain, the effects were expected to be short-term and that both parties would after a given period regain stability (Ramiah, Pham & Moosa, 2017). However, many sectors in U.K have for some time recorded reduced level of effects both locally and from the international markets. Similarly, move has led to increased complication both in the macro and micro-economic activities of the country. As such this study will assess the different effects of Brexit on the performance of Britain both in the local and international markets.
Discussion of the Economic Concepts
The post In Raising Interest Rates, Bank of England Issues ‘Brexit’ Warning by Peter Goodman from the New York Times published on November 2017 presents elaborated effects of the Brexit policies. Diminishing trade across the English Channel has brought about the reduction in the value of the British pound by an average of 15% against the Euro currency since the Brexit vote (Goodman, 2017). The falling currency standards have influenced inflation leading to unaffordable spending habits among households. Notably, the prevailing uncertainty brought about by the new Brexit policy will adversely affect the performance of the monetary sector of the U.K that may equally result in rate hike (Ramiah, Pham & Moosa, 2017). Similarly, states that central banking is a mysterious enterprise in the country as its productivity is determined by both the regulations in the domestic market and the association between the state and other international enterprises. By implementing the Brexit policies, the United Kingdom invited different challenges that could result in major adjustments to the operations of the county. The substantial increase in the banks’ lending rates form an average of 0.25 to 0.50 had been propelled by the constant increase in the average prices of basic commodities such as food (Goodman, 2017). However, other professionals argue that the move to hike the interest rate is a move by the central bank to prepare for any decrease in economic performance.
Critique of the Existing Policy Interventions
The article provides well-discussed effects of the Brexit to both the internal and external economies of Britain. Although the country has set up different strategies to help in limiting the effects of these policies, they still limit the performance of the state (Goodman, 2017). As such, the U.K government has engaged in talks that are aimed at healing the various sectors affected by these regulations. According to the author of the article, the country has been successful in forming mergers that can help in stabilizing the trade sector. Moreover, the central bank is planning to lift the rates applied in lending when the economy stabilizes again to reduce the vulnerability of some of the companies operating in that market (Schiereck, Kiesel & Kolaric, 2016). Considerably, the applications of these alternatives are long-term objectives by the government and will require the utilization of numerous resources to enable effective application of the counter measures.
The application of Brexit policies as presented by the author poses increased threats to the economy of the United Kingdom. The move by the banks to hike the interest rates depicts the preparation by the central monetary body of the state to reduce the negative aspect of the policy. As such, the relevant authorities should present alternative regulations or methods that could help stabilize the economy of Britain.
Goodman, P. (2017). In Raising Interest Rates, Bank of England Issues ‘Brexit’ Warning. Nytimes.com. Retrieved 7 April 2018, from https://www.nytimes.com/2017/11/02/business/britain-economy-rates.html
Ramiah, V., Pham, H. N., & Moosa, I. (2017). The sectoral effects of Brexit on the British economy: early evidence from the reaction of the stock market. Applied Economics, 49(26), 2508-2514.
Schiereck, D., Kiesel, F., & Kolaric, S. (2016). Brexit:(Not) another Lehman moment for banks?. Finance Research Letters, 19, 291-297.