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[PDF] Open Economy Macroeconomics

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Added on  2021-04-21

[PDF] Open Economy Macroeconomics

   Added on 2021-04-21

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Running Head: OPEN ECONOMY MACROECONOMICSOpen Economy MacroeconomicsName of the StudentName of the UniversityAuthor note
[PDF] Open Economy Macroeconomics_1
OPEN ECONOMY MACROECONOMICS1Table of ContentsPart a...........................................................................................................................................2Part b..........................................................................................................................................3Brexit and possible future economic consequences...............................................................3Brexit and economic shocks...................................................................................................4Policy response.......................................................................................................................7References..................................................................................................................................8
[PDF] Open Economy Macroeconomics_2
OPEN ECONOMY MACROECONOMICS2Part a The event of Britain’s exit from EU has an immediate and long-term impact ongrowth, prosperity and trade in the United Kingdom. The economy wide impact of Brexit canbe seen from the performance of different macroeconomic indicators including GDP growth,movement of price level, labor market condition, strength of domestic currency and otherrelated indicators. The GDP growth rate in UK constitutes a mixed performance. GDP growth recoveredmarginally in the third quarter of 2017 to 0.4 percent from 0.3 percent in the previous quarter.UK after Brexit referendum is lagging behind most of the G7 countries. UK’s growth in thepost Brexit period is 0.5% lower on an average than prior to the referendum (McGrattan andWaddle 2017). The construction sector is UK has undergone successive recession afterBrexit. The pound exchange rate against Dollar and Euro has risen significantly indicating aweak domestic currency. Day after the Brexit referendum, the exchange rate has continued tosurged upward. The weak currency by raising import cost of the companies has led to adecline in business growth. The price level has accounted a steady rise following a weak pound that imposes ahigher cost of import. Because of an inflated level of price, the living standard hasdeteriorated. The increasing price of essentials such as food, fuel and clothes has pushed upthe price level to 2.9% from 2.6% in the last quarter (theguardian.com 2018). The weak currency gives a ray of hope that that expected increase in trade volumewill help to offset the downturn in consumption demand. However, the recent trade statisticshas revealed that expansion of trade, outside the EU border has knocked down (Economics2016). The overall trade deficit in UK has remained unchanged.
[PDF] Open Economy Macroeconomics_3
OPEN ECONOMY MACROECONOMICS3The labor market condition has improved as revealed by a declining unemployment to4.3% in recent years. The left workers though suffered from a decline in real wage by 0.4%the average earnings have risen by 2.1% (theguardian.com 2018). This is the only optimisticsign of Brexit until now. Part b Brexit and possible future economic consequencesImmigration Since 2012, the net migration from EU has grown to more than double. Theimmigrant labor force from European Union plays an important role in UK’s economy. Thestrength of the labor force has allowed UK maintained a sustained economic growth withoutincreasing wage and helped the economy to keep interest and price to a considerable lowlevel (Obstfeld 2016). The Brexit has imposed uncertainties about the future of immigrantlabor force. The gain to UK from restricting immigration depends on future of UK’ relationwith EU. In case Britain want retain its access to the single market, it has to allow freemovement of labor between UK and EU. Brexit has a potential threat on available laborsupply. This might hampers productivity of the economy.Manufacturing and Trade The UK’s trade statistics show that more than half of the UK’s exportable ischanneled to the expanded market of European Union. Being the member of custom Union,UK previously enjoy several trade benefits for trading with other EU members. After Brexit,UK is less likely to enjoy benefits from a favorable trade agreement. However, prior to BrexitUK exporters would have to bear some additional expenses to comply with the rules of EU.As far as impact of Brexit is concerned, there is doubt whether UK will be actually hurt fromthe breakdown of trade relation with EU (Portes and Forte 2017). In view of deterioration of
[PDF] Open Economy Macroeconomics_4

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