Global shocks explain half of UK GDP and inflation variation
Global shocks account for around half of UK GDP and CPI variation over the first year, according to Bank of England research published on October 23, 2026. Energy and financial shocks dominate the global contribution.
Energy and finance drive transmission
Five global shocks identified in a Bayesian structural vector autoregression account for around half of the variation in UK GDP and CPI over the first year.
World energy and world financial shocks are the main global drivers of UK inflation and economic activity overall.
World financial shocks also explain most of the variation in Bank Rate fluctuations.
The Global-to-UK model identifies shocks using sign, ranking and bound restrictions.
Extending the analysis to a panel of advanced and emerging economies, the authors find larger responses to a common global financial shock in more financially open economies, particularly for exchange rates and equity prices.
A model built for feedback
Nikoleta Anesti, Ambrogio Cesa-Bianchi, Vania Esady, Ida Hjortsø and Simon Hong wrote Macro Technical Paper No. 9 for the Bank of England (BoE).
Published on October 23, 2026, it belongs to a staff series documenting models, analysis and conceptual frameworks used in monetary policy preparation.
The series encourages feedback and continued model development.
The paper combines an investigation of global transmission to the UK with a cross-country comparison of responses to financial shocks.
Global exposure matters
The results place external shocks at the center of the paper's account of UK fluctuations.
Energy and financial shocks dominate that global contribution, rather than all five shocks contributing equally.
The cross-country findings link financial openness to larger asset-price and exchange-rate responses.
Source: Global-to-UK SVAR
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