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Brexit Uncertainty and Trade Disintegration

Author

Listed:
  • Alejandro G Graziano
  • Kyle Handley
  • Nuno Limão

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. We estimate that at the average disagreement tariff of 4.5% the increase in the probability of Brexit after the referendum lowered EU–UK bilateral export values between 11–20%. Neither the EU or UK exporters believed a trade war was likely.

Suggested Citation

  • Alejandro G Graziano & Kyle Handley & Nuno Limão, 2021. "Brexit Uncertainty and Trade Disintegration," The Economic Journal, Royal Economic Society, vol. 131(635), pages 1150-1185.
  • Handle: RePEc:oup:econjl:v:131:y:2021:i:635:p:1150-1185.
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    More about this item

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F1 - International Economics - - Trade
    • F5 - International Economics - - International Relations, National Security, and International Political Economy

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