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Policy interventions to mitigate the long-run costs of Brexit

Author

Listed:
  • George Economides

    (Athens University of Economics and Business)

  • James Malley

    (University of Glasgow)

  • Apostolis Philippopoulos

    (Athens University of Economics and Business)

  • Anastasios Rizos

    (Bank of Greece)

Abstract

This paper examines the long-term macroeconomic impacts of Brexit on the UK economy employing a dynamic general equilibrium model that incorporates endogenous firm entry, price markups and market competition. By integrating the trade frictions introduced by Brexit, the model explains how increased trade costs have altered firm behaviour, market structure, and broader economic performance. We assess a range of policy responses, from theoretically optimal but practically difficult tax-subsidy schemes to more realistic measures aimed at reducing firm entry barriers, encouraging private and public investment, and subsidizing labour costs. Our findings underscore the critical role of policies that can most directly influence firm creation, investment, and competition in addressing the structural challenges Brexit has introduced.

Suggested Citation

  • George Economides & James Malley & Apostolis Philippopoulos & Anastasios Rizos, 2025. "Policy interventions to mitigate the long-run costs of Brexit," Working Papers 349, Bank of Greece.
    • Handle: RePEc:bog:wpaper:349
    DOI: 10.52903/wp2025349
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    JEL classification:

    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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