How have world shocks affected the UK strongeconomystrong.pdfVIP

Topical ar icles How have world shocks affec ed he UK economy? 167 How have world shocks affected the UK economy ? By Shiv Chowla, Lucia Quaglietti and Łukasz Rachel o the Bank’s International Economic Analysis Division.(1) • The UK economy is closely integrated into the wider global economy. These ties mean that global developments a ect the economic ortunes o the United Kingdom. • This article presents model-based estimates which suggest that world shocks have driven around two thirds o the weakness in UK output since 2007. • Trade linkages are an important channel or the transmission o world shocks to the UK economy. But inancial linkages and spillovers through uncertainty are signi icant, too — and together are likely to account or the maj ority o the impact o world shocks on the United Kingdom since 2007. Overview The UK economy is closely integrated with the rest o the Summary chart Es ima es of he his orical impac of world through the trade o goods and services, and the world shocks on UK GDP grow h exchange o inancial assets. This interconnectedness means Percentage changes on a year earlier 6 that the UK economic environment is shaped, in part, by 4 events in the wider global economy. These events can be external to the United Kingdom, or common to many