Macroeconomics

World Wide Web

Referendum

Vector autoregression

Financial capital

Shock (circulatory)

Depreciation (economics)

Economics

Market economy

Computer science

Economic model

Exchange rate

Politics

Political science

Monetary economics

Variance decomposition of forecast errors

Economic policy

Econometrics

Internal medicine

Human capital

Capital formation

Brexit

Medicine

Pound (networking)

International economics

European union

Economics Letters

We investigate the impact of foreign and domestic economic policy uncertainty (EPU) shocks on the UK economy. Simulations with a structural VAR model indicate that domestic industrial production declines after a shock to the EPU index in the US. On the contrary, disturbances to domestic uncertainty are an important source of real exchange rate fluctuations. Historical decomposition shows that a surge in domestic EPU after Brexit referendum was the reason behind a massive depreciation of the British pound. These results are robust to different model specifications.

Economic policy uncertainty shocks, economic activity, and exchange rate adjustments