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The impact of the Brexit vote on UK financial markets: a synthetic control method approach

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  • Matej Opatrny

    (Charles University)

Abstract

We estimate how the UK financial markets would have evolved if the Remain camp had won the referendum. To construct the counterfactual, we use the synthetic control method. Our results suggest that there would not have been any significant change in the development of the FTSE 100 Index in the medium to long term if there had not been a referendum. On the other hand, we find a significantly negative effect of 1.2 percentage points on the 10-year bond yield. Given the geopolitical circumstances in mid 2016, financial agents investing in the pound could have sought safer investment options represented by longer-term government bonds, which consequently could result in lower bond yields.

Suggested Citation

  • Matej Opatrny, 2021. "The impact of the Brexit vote on UK financial markets: a synthetic control method approach," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(2), pages 559-587, May.
    • Handle: RePEc:kap:empiri:v:48:y:2021:i:2:d:10.1007_s10663-020-09481-7
    DOI: 10.1007/s10663-020-09481-7
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    More about this item

    Keywords

    Brexit; Financial markets; Macroeconomic indicators; Synthetic control method;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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