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2. The Global Impact of Brexit Uncertainty
- Author:
- Tarek A. Hassan, Laurence van Lent, Stephan Hollander, and Ahmed Tahoun
- Publication Date:
- 01-2019
- Content Type:
- Working Paper
- Institution:
- Institute for New Economic Thinking (INET)
- Abstract:
- Using tools from computational linguistics, we construct new measures of the impact of Brexit on listed firms in the United States and around the world: the share of discussions in quarterly earnings conference calls on costs, benefits, and risks associated with the UK’s intention to leave the EU. Using this approach, we identify which firms expect to gain or lose from Brexit and which are most affected by Brexit uncertainty. We then estimate the effects of these different kinds of Brexit exposure on firm-level outcomes. We find that concerns about Brexit-related uncertainty extend far beyond British or even European firms. US and international firms most exposed to Brexit uncertainty have lost a substantial fraction of their market value and have reduced hiring and investment. In addition to Brexit uncertainty (the second moment), we find that international firms overwhelmingly expect negative direct effects of Brexit (the first moment), should it come to pass. Most prominently, firms expect difficulties resulting from regulatory divergence, reduced labor mobility, trade access, and the costs of adjusting their operations post-Brexit. Consistent with the predictions of canonical theory, this negative sentiment is recognized and priced in stock markets but has not yet had significant effects on firm actions.
- Topic:
- Economics, Political Economy, Regional Cooperation, Brexit, Global Political Economy, and Economic Policy
- Political Geography:
- Britain, United States, United Kingdom, Europe, and European Union
3. Brexit: Everyone Loses, but Britain Loses the Most
- Author:
- Maria C. Latorre, Zoryana Olekseyuk, Hidemichi Yonezawa, and Sherman Robinson
- Publication Date:
- 03-2019
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This paper examines 12 economic simulation models that estimate the impact of Brexit (Britain’s exit from the European Union). Most of the studies find adverse effects for the United Kingdom (UK) and the EU-27. The UK’s GDP losses from a hard Brexit (reversion to World Trade Organization rules due to a lack of UK-EU agreement) range from –1.2 to –4.5 percent in most of the models analyzed. A soft Brexit (e.g., Norway arrangement, which seems in line with the nonbinding text of the political declaration of November 14, 2018, on the future EU-UK relationship) has about half the negative impact of a hard Brexit. Only two of the models derive gains for the UK after Brexit because they are based on unrealistic assumptions. The authors analyze more deeply a computable general equilibrium model that includes productivity and firm selection effects within manufacturing sectors and operations of foreign multinationals in services. Based on this latest model, they explain the likely economic impact of Brexit on a wide range of macroeconomic variables, namely GDP, wages, private consumption, capital remuneration, aggregate exports, aggregate imports, and the consumer price index.
- Topic:
- Economics, World Trade Organization, Brexit, and Multinational Corporations
- Political Geography:
- Britain, Europe, and European Union