Brexit Uncertainty and Trade Disintegration
49 Pages Posted: 11 Dec 2018 Last revised: 23 Mar 2023
Date Written: December 2018
Abstract
We estimate the uncertainty effects of preferential trade disagreements. Increases in the probability of Britain’s exit from the European Union (Brexit) reduce bilateral export values and trade participation. These effects are increasing in trade policy risk across products and asymmetric for UK and EU exporters. We estimate that a persistent doubling of the probability of Brexit at the average disagreement tariff of 4.5% lowers EU-UK bilateral export values by 15 log points on average, and more so for EU than UK exporters. Neither believed a trade war was likely.
Suggested Citation: Suggested Citation
Graziano, Alejandro and Handley, Kyle and Limão, Nuno, Brexit Uncertainty and Trade Disintegration (December 2018). NBER Working Paper No. w25334, Available at SSRN: https://ssrn.com/abstract=3298714
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