scholarly journals EU28 Capital Market Perspectives of a Hard BREXIT: Theory, Empirical Findings and Policy Options

2019 ◽  
Vol 16 (1) ◽  
Author(s):  
Paul J.J. Welfens ◽  
Fabian Baier ◽  
Samir Kadiric ◽  
Arthur Korus ◽  
Tian Xiong
Keyword(s):  
Interest Rates ◽  
Trade Agreement ◽  
Corporate Bond ◽  
Government Bonds ◽  
Risk Premiums ◽  
Bond Risk ◽  
The Uk ◽  
Key Aspects ◽  
The Cost ◽  
The Eu

Abstract Key aspects covered refer to the cost of leaving the EU and in particular the implications for corporate bond risk premiums in the UK and the Eurozone: The gap between the interest rates of corporate bonds and government bonds could increase in the UK and Eurozone, respectively, as a result of BREXIT where the 2016 BREXIT referendum itself is considered to be a first BREXIT event (see the empirical findings), followed by the main BREXIT event, namely the day of officially leaving the EU – possibly as a No-deal BREXIT. It is as yet not clear what type of BREXIT will be implemented – hard versus soft – and it is also unclear what type of free trade agreement the EU and the UK could accomplish post-BREXIT. However, it is obviously necessary to carefully consider the background of the BREXIT dynamics and to then refer to various versions of BREXIT if one is to understand the inherent politico-economic dynamics of BREXIT – with a No-deal case representing an analytical benchmark which most politicians in the British Parliament obviously would want to avoid; a simple way to indeed avoid this case, with obvious high costs for the British economy, is not easy to discern as the UK’s political system is fractured. If the safe-haven status of the UK should be impaired by BREXIT, the rise of government bond interest rates by 0.3 percent would stand for the same burden as the net UK contribution to the EU.

scholarly journals BREXIT IMPLICATIONS FOR AGRI-FOOD TRADE BETWEEN POLAND AND THE UK

2019 ◽  
Vol XXI (4) ◽  
pp. 589-599
Author(s):  
Aldona Zawojska
Keyword(s):  
Lower Cost ◽  
Trade Agreement ◽  
Food Products ◽  
The European Union ◽  
Trade Relations ◽  
Doing Business ◽  
Central Statistical ◽  
Central Statistical Office ◽  
The Uk ◽  
The Eu

The article is a contribution to the discussion on the anticipated consequences of the United Kingdom’s withdrawal from the European Union for Poland’s trade relations with this country, with particular emphasis on the likely impacts of a hard or no-deal Brexit on Polish exporters. Its aim is to provide readers with an understanding of how agri-food flows between Poland and the UK (especially Poland’s exports) could be affected once the UK departs the EU. The question is important considering that, in recent years, the UK has been the second biggest importer and a net importer of agricultural and food products from Poland. The study is based on trade data from the UN Comtrade Database and Poland’s Central Statistical Office, and on tariff data from the UK’s Department for International Trade. Taking into account the possible imposition of customs duties announced thus far by the British government on the import of agri-food products from third countries in the event of a no-trade agreement with the EU, the introduction of additional non-tariff barriers, as well as increased transactional (friction) costs and complexity of doing business with foreign partners, a hard Brexit would have serious implications for Poland’s fast growing agri-food exports to the UK. It would even lead to a collapse of some Polish supplies, particularly of meat and dairy commodities, to Great Britain. The loss of two-way preferences in trade now arising from participation in the EU single market will undermine the competitiveness of Polish producers on UK’s market both against British producers and lower cost exporters from outside the EU.

scholarly journals Quantitative Monetary Easing and Risk in Financial Asset Markets

2006 ◽  
Vol 6 (1) ◽  
pp. 1-54 ◽  
Author(s):  
Takeshi Kimura ◽  
David H. Small
Keyword(s):  
Interest Rates ◽  
Large Scale ◽  
Corporate Bonds ◽  
Asset Markets ◽  
Low Grade ◽  
Short Term ◽  
Government Bonds ◽  
Risk Premiums ◽  
Portfolio Rebalancing

In this paper, we empirically examine the portfolio-rebalancing effects stemming from the policy of “quantitative monetary easing” recently undertaken by the Bank of Japan when the nominal short-term interest rate was virtually at zero. Portfolio-rebalancing effects resulting from the open market purchase of long-term government bonds under this policy have been statistically significant. Our results also show that the portfolio-rebalancing effects were beneficial in that they reduced risk premiums on assets with counter-cyclical returns, such as government and high-grade corporate bonds. But, they may have generated the adverse effects of increasing risk premiums on assets with pro-cyclical returns, such as equities and low-grade corporate bonds. These results are consistent with a CAPM framework in which business-cycle risk importantly affects risk premiums. Our estimates capture only some of the effects of quantitative easing and thus do not imply that the complete set of effects were adverse on net for Japan’s economy. However, our analysis counsels caution in accepting the view that, ceteris paribus, a massive large-scale purchase of long-term government bonds by a central bank provides unambiguously positive net benefits to financial markets at zero short-term interest rates.

Support for Scottish independence is growing stronger

2020 ◽  
Keyword(s):  
Prime Minister ◽  
Economic Impacts ◽  
Trade Agreement ◽  
Content Type ◽  
Uk Government ◽  
Scottish Independence ◽  
The Uk ◽  
First Time ◽  
The Eu ◽  
Sustained Increase

Significance For the first time, there is a sustained increase in support for Scottish independence. The main reasons include dislike of UK Prime Minister Boris Johnson and his cabinet north of the border, the UK government’s pursuit of a ‘hard’ Brexit and questions about its response to the COVID-19 pandemic. Impacts Soaring Scottish unemployment when the UK furlough schemes end would undermine London’s claim to be protecting Scottish jobs. Rising support for Scottish independence could prompt the UK government to seek a closer trade agreement with the EU. The UK government will be unable to conceal the economic impacts of Brexit under the economic fallout of COVID-19. A Scottish vote for independence would put huge pressure on the UK government to resign and call early elections.

Unstable politics may make trade deals uncertain

2019 ◽  
Keyword(s):  
Financial Services ◽  
Trade Agreement ◽  
National Elections ◽  
Content Type ◽  
The Us ◽  
Ideological Divergence ◽  
The Uk ◽  
Trade Deals ◽  
Trade Partners ◽  
The Eu

Subject Politics and trade talks. Significance Understanding the factors that determine how long trade negotiations take will help businesses navigate the uncertainty, as the UK government prepares to negotiate trade agreements once it leaves the EU. The Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU took seven years to finalise. Less comprehensive renegotiations of international agreements can be shorter, including the US-Mexico-Canada agreement, which took less than two years. Impacts UK sectors highly exposed to the EU or United States, including automotive and financial services, face prolonged investment uncertainty. Timing of national elections, lobbying and the ideological divergence between trade partners will determine post-Brexit trade deal talks. Continued polarisation of major economies' electorates will delay or stop other global deals, including on foreign aid and climate change.

scholarly journals Trade and Cooperation Agreement Between the EU and the UK: Conditionality Versus Sovereignty

2021 ◽  
Vol 102 (2) ◽  
pp. 5-16
Author(s):  
Lyudmila Babynina ◽  
Keyword(s):  
European Union ◽  
Transition Period ◽  
Trade Agreement ◽  
Economic Losses ◽  
Customs Union ◽  
The European Union ◽  
Cooperation Agreement ◽  
British Case ◽  
The Uk ◽  
The Eu

The United Kingdom left the European Union on January 31, 2020. On December 31, 2020, the transition period ended, during which all EU rules and regulations applied to Britain. The trade agreement was reached in record time, but it is too early to talk about long-term mutual benefits. The British case in the system of trade and economic agreements of the European Union is unique. On the one hand, at the time of the negotiations, the UK retained EU law, was a member of the EU Single Internal Market and Customs Union, subject to the jurisdiction of the EU Court of Justice. On the other hand, the EU for the first time found itself in a situation when a third country was determined to distance itself as much as possible from EU rules while concluding a trade agreement, despite the obvious economic losses. At the same time, both sides understood that the absence of an agreement threatened all interested actors with serious losses, and that it must be concluded. As a result, the compromise text of the TCA reflects the fundamentally different approaches of the parties to bilateral cooperation, and its provisions suggest a change of its format in the future.

'Brexit' fallout could hit EU financial assets widely

2016 ◽  
Keyword(s):  
Financial Markets ◽  
Current Account Deficit ◽  
Financial Assets ◽  
Government Bonds ◽  
Content Type ◽  
Eu Membership ◽  
Run Up ◽  
High Yields ◽  
The Uk ◽  
The Eu

Subject The potential fallout from 'Brexit' on both UK and EU-wide financial assets. Significance In the run-up to the June 23 referendum on the United Kingdom's EU membership, the 'Brexit' risk has been weighing on UK confidence and investment. The reaction in financial markets has been more benign, with the pound rising by 3.6% against the dollar since end-February and a 54-basis-point (bp) year-to-date fall in the ten-year gilts yield. The absence of a 'Brexit premium' suggests investors may be underpricing both the UK-specific and EU-wide risks associated with a UK exit from the EU at a time of heightened market volatility. Impacts UK government bonds, along with their US equivalents, will remain attractive to investors because of their relatively high yields. Meanwhile, euro-area and Japanese bonds, whose yields are negative or slightly positive at best, will remain unattractive. The prolonged uncertainty during the post-referendum renegotiations could shave 1.0-1.5 pp off UK GDP growth by end-2017. The wide UK current account deficit and the country's reliance on foreign capital underscore the risks associated with Brexit.

Brexit and Canada: Stopgap Solutions for the EU–Canada Comprehensive Economic and Trade Agreement (CETA) or a New Beginning?

2021 ◽  
Vol 58 (2) ◽  
pp. 248-264
Author(s):  
Nanette Neuwahl
Keyword(s):  
Transition Period ◽  
Trade Agreement ◽  
Cooperation Agreement ◽  
New Beginning ◽  
The Uk ◽  
The Eu

This article investigates how Canada’s trade with the EU-27 and the UK might be affected by Brexit. As the transition period foreseen in the 2019 UK Withdrawal Agreement has ended, the EU and the UK are no longer one customs area. The EU–Canada Comprehensive Economic and Trade Agreement (CETA), like other EU agreements, has ceased to apply to the UK. Henceforth, the policies and legislation of the UK and the EU-27 will invariably diverge. Taking into account both the EU–UK Trade and Cooperation Agreement as well as the Canada UK Trade Continuity Agreement concluded in late-2020, the article shows that the agreements reached, while providing immediate stopgaps for some of the fallout of Brexit, also represent potential for a new departure.

scholarly journals The EU’s ‘strategic partnership’ with China in a post-Brexit world: Recalibrating internal dynamics and facing up to external challenges

2020 ◽  
Vol 4 (1) ◽  
Author(s):  
Scott A.W. Brown
Keyword(s):  
Critical Role ◽  
Trade Agreement ◽  
Strategic Partnership ◽  
Strategic Objectives ◽  
Global Presence ◽  
Belt And Road ◽  
The Uk ◽  
The Impact ◽  
The Belt And Road ◽  
The Eu

The UK has played a critical role in shaping EU–China relations. Policymakers need to carefully consider the extent to which Brexit will weaken the EU’s collective power – shifting the balance in China’s favour – and impact prospects for increasing EU involvement in East Asia. Brexit arrives at a moment when negotiations for an ambitious bilateral investment agreement continue – with an eye on an eventual free trade agreement – while EU policymakers increasingly perceive challenges arising from the expansion of China’s global presence, exemplified by the Belt and Road Initiative, the creation of alternative international institutions, and its behaviour in the South China Sea disputes. As both the EU and China emerge as global powers, the significance of their relationship’s trajectory extends beyond bilateral confines. I analyse how the relationship’s contemporary dynamics are playing out and likely to evolve. Assessing the impact of Brexit on the relative power balance, specifically the EU27’s collective economic, military and political power, sets the scene for mapping out the ‘state of play’ in four crucial issue areas, highlighting the UK’s preferences and input. This leads to consideration of how the loss of resources and shifting constellation of preferences among the EU27 could affect the attainment of strategic objectives. I argue that while Brexit does not fundamentally disrupt the EU–China relationship, it will weaken the EU’s capacity to respond to China’s rise and necessitates a recalibration to the new constellation of Member State preferences and reduced resources.

scholarly journals EU–UK institutional arrangements and Brexit: a view from Switzerland

2021 ◽  
Vol 5 (1) ◽  
Author(s):  
Yuliya Kaspiarovich
Keyword(s):  
Trade Agreement ◽  
Institutional Arrangements ◽  
Eu Law ◽  
The European Union ◽  
Cooperation Agreement ◽  
Eu Member States ◽  
Close Relationship ◽  
The One ◽  
The Uk ◽  
The Eu

In 1972 the UK signed an accession treaty with the EU while Switzerland and the EU concluded a free trade agreement. Nowadays, both countries have a very close relationship with the EU and are not (or not anymore) EU Member States. This article aims to analyse two complex legal paths taken by countries able but not willing (or no longer willing) to be part of the EU through institutional arrangements they have already negotiated or are currently negotiating with the EU. On the one hand, the UK was part of the EU legal order and is now extracting itself from the realm of EU law while switching to relations with the EU based on international law. On the other hand, Switzerland has built its relations with the EU on numerous bilateral agreements based on EU law without establishing a homogeneous institutional mechanism, which the EU has been insistently demanding since 2013. These two situations are paradoxically similar as for both of them the design of institutional arrangements depends on the degree of integration with/extraction from EU law. A comparison between the EU–UK withdrawal agreement, the EU–UK Trade and Cooperation Agreement (TCA) and the EU–Switzerland draft institutional agreement, as proposed in this article, confirms that the degree of institutional flexibility that the EU is able to offer to a third country with which it concludes an agreement is dependent on whether that agreement is based on EU law, and in particular, EU internal market law. This article argues that depending on the nature of law the agreement is based on, from an EU perspective variations in the role of Court of Justice of the European Union (CJEU) and/or of an arbitral tribunal may make sense, but this is not the case when one takes an outside perspective.

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