- Home
- Publications
- After The Referendum: What Are Financial Markets Telling Us So Far?
After the Referendum: What are Financial Markets Telling Us So Far?
Sign in to AccessDownloads
This content is restricted to corporate members, NiGEM subscribers and NIESR partners.
External Authors
Lloyd, S
Related Themes
Macro-Economic Dynamics and PolicyIssue
3
Abstract:
Financial markets have been volatile since the UK’s referendum on membership of the EU last Thursday. Within the NiGEM team we are constantly monitoring developments to inform our view on the outlook for the UK economy, which will eventually result in our updated quarterly forecast to be published in August. Financial market prices in the week since the referendum seem to validate our prior assumption that markets expect a persistent risk premium to open up in sterling, although there is some evidence this has been delayed as the timetable for exiting the EU has been pushed back. Recent falls in gilt yields have been driven by simultaneous reductions in interest rate expectations and term premia, with the former likely reflecting a more subdued outlook for the UK economy. The latter is contrary to our pre-referendum assumption and seems to suggest that the demand for safe assets in a period of heightened risk is dominating the elevated risk associated with UK government bonds. Equity markets have also suffered which, if it were to persist would simultaneously raise funding costs for businesses and reduce activity and spending through the wealth channel. Lastly, we show that these movements are not restricted to the UK, but that the relatively few data outturns we have post-referendum suggest that there could very well be sizeable spillovers to our European neighbours.
NiGEM Observations is a series of occasional notes published by the NiGEM team on topical macroeconomic modelling issues for NIESR corporate sponsors and NiGEM subscribers.
Related Blog Posts
Public Debt Sustainability and Fiscal Rules
Stephen Millard
Benjamin Caswell
05 Feb 2024
4 min read
Related Projects
Related News
Letter to the Financial Times: Is Perfidious Albion About to Make a Return?
14 Jun 2024
3 min read
Call for Papers: Lessons From Quantitative Easing & Quantitative Tightening
09 Feb 2024
1 min read
Related Publications
Everything You Wanted to Know About the US Budget Deficit and Debt But Were Afraid to Ask
09 May 2024
Global Economic Outlook Box Analysis
To What Extent Has the Recovery and Resilience Facility Supported the EU Recovery from Covid?
09 May 2024
Global Economic Outlook Topical Feature
Inflation Differentials Among European Monetary Union Countries: An Empirical Evaluation With Structural Breaks
20 Nov 2023
National Institute Economic Review
Related events
2024 UK General Election: The Economy and Living Standards
Assessing Cycles and Structural Changes in Markets
Business Conditions Forum
With an election expected to take place at some point in 2024, we begin the year by focusing this quarter’s Business Conditions Forum on the following topics: Can we expect…