Financial Analytics: Science and Experience

Monetary and fiscal premises for Brexit and prospects for the British pound through historical analogies of controllable disparities

Vol. 10, Iss. 2, FEBRUARY 2017

PDF  Article PDF Version

Received: 23 November 2016

Received in revised form: 15 December 2016

Accepted: 16 December 2016

Available online: 28 February 2017

Subject Heading: Economic policy

JEL Classification: N24, P44

Pages: 128-142

Anureev S.V. Financial University under Government of Russian Federation, Moscow, Russian Federation

Importance The article overviews monetary and fiscal premises for the UK's withdrawal from the European Union, and consequences for the British pound.
Objectives Analyzing statistical data, I demonstrate considerable monetary and fiscal disparities in the United Kingdom after 2008, and how Her Majesty's Exchequer and the Bank of England prepare for the Brexit-driven turbulence. The research also identifies what impedes the elimination of those disparities using conventional approaches of monetary and fiscal policies.
Methods I applied the method of comparative historical analysis and presented a retrospect of similar renowned cases. I also used the method of economic modeling.
Results This political extravagance was noted to conceal fundamental premises for the British pound devaluation and buyout of British securities dropping in their value. I made up an economic model that helped analyze typical activities to eradicate disparities. The article illustrates advantages of such unconventional actions teetering on the brink of finance and politics, and scenarios of the UK's financial system after Brexit.
Conclusions and Relevance In the short run, negative forecasts are plausible stating that political and currency turbulence will continue, with the foreign exchange rate of the British pound and the value of assets stagnating. The stability of the UK's political system is forecast to grow more resistant to Brexit challenges, with the same trend in currency interventions and buyout of assets denominated in the British pounds.

Keywords: public debt, deficit, current account, monetary aggregates, quasi-default


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