UK Policy Uncertainty, Monetary Policy Stance and Exchange Rates in Light of Brexit

17 Pages Posted: 18 Sep 2018

See all articles by Michael Ellington

Michael Ellington

University of Liverpool

Costas Milas

University of Liverpool

Date Written: September 5, 2018

Abstract

This paper assesses the impact of economic policy uncertainty to UK monetary policy stance and exchange rate movements in light of the UK’s decision to leave the European Union. Our results show that the economic significance of exchange rate movements heightens during the Referendum period. We document statistical differences in the economic importance of policy uncertainty shocks to the interest rate differential in June 2016 relative to other dates thereby providing evidence in favour of time-variation in the influence that policy uncertainty has on UK monetary policy stance.

Keywords: Brexit, uncertainty, interest rate spread, shadow rates, exchange rates

JEL Classification: E6, F4

Suggested Citation

Ellington, Michael and Milas, Costas, UK Policy Uncertainty, Monetary Policy Stance and Exchange Rates in Light of Brexit (September 5, 2018). Available at SSRN: https://ssrn.com/abstract=3244481 or http://dx.doi.org/10.2139/ssrn.3244481

Michael Ellington (Contact Author)

University of Liverpool ( email )

Chatham Street
Liverpool, L69 7ZA
United Kingdom

Costas Milas

University of Liverpool ( email )

Chatham Street
Liverpool
United Kingdom

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