The Global Impact of Brexit Uncertainty
76 Pages Posted: 23 Dec 2019 Last revised: 4 Aug 2021
Date Written: February 11, 2019
We propose a text-based method for measuring and analyzing the international propagation of uncertainty shocks at the firm level. We apply this method to estimate the impact of Brexit-related uncertainty and find widespread reverberations on listed firms in 81 countries. International firms most exposed to Brexit uncertainty not only significantly lost market value but also reduced hiring and investments. In addition to Brexit uncertainty (the second moment), we find that international firms overwhelmingly expected negative direct effects from Brexit (the first moment). Most prominently, firms expected difficulties from regulatory divergence, reduced labor mobility, and limited trade access.
Keywords: Brexit, uncertainty, sentiment, machine learning, cross-country effects
JEL Classification: D8, E22, E24, E32, E6, F0, G18, G32, G38, H32
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