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The impact of Brexit on U.K. habits for expenditure on imports and consumption

Author

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  • Fleissig, Adrian R.
  • Swofford, James L.

Abstract

Habit persistence for imported goods and imported services has important policy implications for economic shocks like Brexit. We find a moderate amount of habit persistence in U.K. imports. Habits for imported goods declines in the post-Brexit vote sample, suggesting that habits are already changing lowering Brexit transition costs for UK consumers. Habits for imported services change little. We find imported services are generally complementary, while imported goods tend to be substitutes, for most of the other types of expenditure. Long-run budget elasticities indicate despite Brexit the U.K. economy will become more outward looking over time.

Suggested Citation

  • Fleissig, Adrian R. & Swofford, James L., 2023. "The impact of Brexit on U.K. habits for expenditure on imports and consumption," International Review of Economics & Finance, Elsevier, vol. 88(C), pages 196-203.
    • Handle: RePEc:eee:reveco:v:88:y:2023:i:c:p:196-203
    DOI: 10.1016/j.iref.2023.06.024
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    References listed on IDEAS

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    1. Swati Dhingra & Thomas Sampson, 2022. "Expecting Brexit," Annual Review of Economics, Annual Reviews, vol. 14(1), pages 495-519, August.
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    More about this item

    Keywords

    Brexit; Habit formation; Short-run; And long-run estimates; Budget elasticities;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical

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