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Parameter Sensitivity Analysis of Hierarchical Spatial Economy: Trade Strategy around Brexit

Author

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  • Kiyohiro Ikeda
  • Yosuke Kogure
  • Hiroki Aizawa
  • Yuki Takayama

Abstract

This paper presents a systematic framework for analyzing the economic parameter sensitivity of a hierarchical spatial economy within economic geography models. Through the hierarchical reduction approach proposed in this study, the original region-level governing equation is condensed into country-level and alliance-level equations. Based on the reduced governing equation, we formulate the sensitivity of economic variables on each country's population. This approach is applied to the analysis of international trade competition -- covering both trade liberalization and protectionism around Brexit -- among the UK, France, and Germany. We find that both the UK and the EU should focus on reducing domestic transportation costs, whereas tariffs and retaliatory tariffs act as a double-edged sword that can either strengthen or weaken their trade positions.

Suggested Citation

  • Kiyohiro Ikeda & Yosuke Kogure & Hiroki Aizawa & Yuki Takayama, 2026. "Parameter Sensitivity Analysis of Hierarchical Spatial Economy: Trade Strategy around Brexit," Papers 2606.09472, arXiv.org.
    • Handle: RePEc:arx:papers:2606.09472
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    File URL: http://arxiv.org/pdf/2606.09472
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