For the time being, the UK has conducted a referendum and triggered Article 50 but doesn’t leave the European Union until March next year: there are no tariff or trade barriers. Yet the pound fell immediately after the referendum result in anticipation of more difficult external trading conditions in the future; this has substantially hurt the purchasing power of UK households. Business investment slowed down – as apparently it has in Canada due to NAFTA uncertainty. The Bank of England estimates that UK real GDP is already 1¾-2% lower than it otherwise would be as a result of Brexit. Fiscal policy Uncertainty about fiscal policy in many advanced economies is a second source of policyinduced uncertainty. Public debt has risen significantly since the Great Recession. Average gross government debt in the Euro Area rose from around 65% of GDP in 2007 to peak at over 90% in 2014 and is currently still over 85%, despite the fact that primary balances have improved on average across the Euro Area. The macroeconomic costs of fiscal uncertainty can be felt even without an actual sovereign debt crisis. Risk premia increase and raise the cost of borrowing but without any riskadjusted increase in return for savers. The risks of fiscal uncertainty are highly non-linear and one could almost say binary due to the reaction function of financial markets, as we have seen since 2010 in the Euro-zone. Below a certain threshold, fiscal uncertainty has very limited effects on sovereign borrowing spreads or economic activity.
First prize The first prize was awarded to PEGI MYSHQERRI, a student at the Goethe University, Germany, for the study on the Master's theme: The effects of ECB Asset Purchases on European Corporate Bond Markets)". In her work, Pegi has assessed the impact and channels of the European Central Bank's quantitative easing policies on the interest rate of corporate bonds. The author has also analysed the behaviour of firms toward these programs of the European Central Bank, and whether they have affected or not in the issuance of an acceptable (adequate) debt. More specifically, Pegi has employed the econometrics methods to assess that both programs - the purchasing program in the corporation sector (CSPP) as well as the emergency purchasing program during the pandemic (PEPP) - have had an effect on the interest rate of corporate bonds, but the scale of the impact of each program has been different. Furthermore, results show that quantitative easing programs have had a considerable role in mitigating the lending conditions to corporation in the Euro area, affecting thus the increase of both the number and volume of corporate bonds issued. First, I would like to commend the winner of the first prize for choosing this theme; a rather interesting and relevant theme for banks in advanced economies, but which has been gaining traction in emerging countries.