In this briefing paper, Dr Ayele and Professor Winters look at whether the immediate effect of the result of the Brexit referendum –  the depreciation of sterling relative to all major currencies and the failure to increase UK exports after 2016  – could have been foreseen. They provide a brief description of recent UK trade history, followed by a review of different studies of the effect of exchange rate changes on trade prices, consumer prices and trade quantities. Finally, they explore the apparent effect of the sterling depreciation in June 2016 on UK trade and price behaviour.  The authors show that the pass-through of exchange rate changes to trade and consumer prices and thence to trade quantities is rather complex, and hence difficult to predict with any confidence. They conclude that the failure of UK exports to boom was in part due to the dramatic increase in trade-policy uncertainty that the Brexit result heralded.

Read Briefing Paper 44: SHOULD THE BREXIT STERLING DEPRECIATION HAVE BOOSTED EXPORTS? HOW EXCHANGE RATES AFFECT TRADE AND PRICES