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When the models don't work, what are firms supposed to do?
When, at the height of the Brexit debate, the Bank of England produced scenarios on the consequences of a “no-deal” departure from the EU, it was predictably controversial.
For Brexit supporters, the Bank’s worst-case scenario, used in its stress tests for the banks, was another example of “project fear” from Mark Carney.
To be fair, it was pretty scary, including a 35% fall in house prices, a sharp fall in sterling, a rise in inflation to 6.5%, a doubling of unemployment and a fall in Britain’s gross domestic product of 10.5% relative to the pre-referendum trend. Oh, and yes, a 4 point rise in official interest rates.