Brexit Uncertainty and Trade Disintegration

49 Pages Posted: 11 Dec 2018

See all articles by Alejandro Graziano

Alejandro Graziano

University of Maryland

Kyle Handley

University of Michigan, Stephen M. Ross School of Business

Nuno Limão

University of Maryland - Department of Economics

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.

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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

Alejandro Graziano (Contact Author)

University of Maryland

Kyle Handley

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Nuno Limão

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-7842 (Phone)
301-405 3542 (Fax)

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