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Modelling the Long Term Potential Macroeconomic Impact of UK leaving the UK: case study on Wales

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  • Khorana, Sangeeta
  • Narayanan, Badri
  • Perdikis, Nicholas

Abstract

This paper employs a computable general equilibrium (CGE) dynamic simulation model to analyse United Kingdom (UK) and European Union (EU) relationship and its impact on the Welsh economy. Two potential scenarios are simulated: (a) no economic partnership agreement between the UK and EU on 31 December 2020, i.e. trade between the UK and EU and the rest of the world would revert on World Trade Organisation (WTO) basis and default Most Favoured Nation (MFN) tariffs apply. (b) a transition period, i.e. continue the existing arrangement that includes membership of the Customs Union and Single Market, for a limited period after 31 December 2020. This models the possibility of a transition period to last for either two, three, five or 10 years. Results present a negative forecast for the Welsh (and UK) economy. The scenario, which sees the UK reverting to trading with the EU on WTO terms, generates maximum losses for Wales (and the UK) in the long-term. A transition period arrangement projects long-term losses for Wales that depend on the length of transition period such that a longer transition minimises losses for Wales (and the UK).

Suggested Citation

  • Khorana, Sangeeta & Narayanan, Badri & Perdikis, Nicholas, 2020. "Modelling the Long Term Potential Macroeconomic Impact of UK leaving the UK: case study on Wales," Conference papers 333236, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:333236
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    1. Monique Ebell & James Warren, 2016. "The Long-Term Economic Impact of Leaving the EU," National Institute Economic Review, National Institute of Economic and Social Research, vol. 236(1), pages 121-138, May.
    2. Badri Narayanan, G. & Khorana, Sangeetha, 2014. "Tariff escalation, export shares and economy-wide welfare: A computable general equilibrium approach," Economic Modelling, Elsevier, vol. 41(C), pages 109-118.
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