In July 2016, India’s Business Standard featured an interview with Professor Hansen about the impact of Brexit, interest rates, and the role of trade in discussions about the macroeconomy and financial markets. The interview was drawn from a press conference where Professor Hansen appeared as part of his visit to the Indian School of Business in Hyderabad.
You spoke about the correlation between macroeconomy and markets. So where does trade fall into? It is true that a lot of models that I have looked at are not international enough. Unfortunately, I have not done enough work on it. But, I think, that what’s going to happen now after Brexit is Britain will become protectionist. The best way is to keep the trade barriers low. I hope it does not happen in the case of Brexit. I agree that trade is important. Financial markets are very forward looking. So, investors are making guesses about what they think is going to happen and they are trying to figure out what to do today. That’s how investments work. Usually, financial markets tend to be early signals of what is going to happen in the future because they are forward looking in nature.