What is it about?
The impact of an increasingly likely Brexit No Deal Scenario - as well as uncertainty over the state of trade relations between the world's major economies generated turbulence and volatility in the financial markets in 2019.This paper highlights how trade policies - as well as central bank responses to heightened uncertainty about future trade deals, could trigger opposing and contrasting effects,
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Why is it important?
This is important and of significance in view of the historically low levels (near zero levels) of inflation at the time - as well as concerns and worries of investors in relation to the subsequent rate cuts announced - first in August 2019 - as well as latter months which followed. Investors had panicked because it had appeared unjustified that such rates should be instigated - however given the prevailing global economic growth rate - as well as trade tensions between the world's major trading economies - coupled with impending imposition of digital services taxes - which were likely to further fuel retaliatory tariff impositions, it was no surprise that the Federal Reserve implemented federal rates cuts.
Perspectives
Against the backdrop of the above mentioned events - which have impacted monetary policy decisions in 2019 - unconventional monetary policy tools have had to be adopted. How much tools federal regulators have at their disposal appears limited at the moment in view of the COVID-19 outbreak. It will be interesting to observe what tools will be implemented in the months to come as more lax monetary and regulatory policies and measures are implemented in areas impacted economically by the COVID-19 outbreak - this having triggered massive losses across global stock markets - at unprecedented levels synonymous to those witnessed during the 2008 Financial Crisis.
Prof Marianne Ojo
Northwestern University
Read the Original
This page is a summary of: A Tale of Two Cities and Trade Policies: Brexit No Deal Scenario and Trade Tariff Hikes, SSRN Electronic Journal, January 2019, Elsevier,
DOI: 10.2139/ssrn.3431451.
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