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Cross-Border Trade Fictions: The Effect of Negotiation Commitments on Ireland’s Response to Brexit

Author

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  • O'Grady, Michael

    (Central Bank of Ireland)

Abstract

Employing an augmented version of the synthetic control method, we estimate the effects of the Brexit vote shock and Irish border guarantees on trade patterns between Ireland and the UK, relative to other euro area economies. We let a matching algorithm determine a combination of comparison economies that best resembles the path of Irish bilateral trade with the UK before (i) the Brexit referendum and (ii) guarantees from both the UK and the EU to deliver a “no-border solution” to the island of Ireland. The differences between imports and exports for Ireland and its synthetic doppelganger represent this commitment to a “no-border solution” between Northern Ireland and the Irish Republic, mitigating the negative effects of the Brexit vote shock on bilateral Irish-UK trade. We show that, contrary to the prevailing narrative, Irish imports and exports did not respond to the uncertainty surrounding the Brexit vote to the same extent as other euro area member countries

Suggested Citation

  • O'Grady, Michael, 2025. "Cross-Border Trade Fictions: The Effect of Negotiation Commitments on Ireland’s Response to Brexit," Research Technical Papers 2/RT/25, Central Bank of Ireland.
    • Handle: RePEc:cbi:wpaper:2/rt/25
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    File URL: https://www.centralbank.ie/docs/default-source/publications/research-technical-papers/02rt25-cross-border-trade-fictions--the-effect-of-negotiation-commitments-on-ireland's-response-to-brexit.pdf?sfvrsn=d8f5651a_6
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    More about this item

    Keywords

    Brexit; European Union; Synthetic Control Methods; Trade Policy Uncertainty; Globalization.;
    All these keywords.

    JEL classification:

    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F68 - International Economics - - Economic Impacts of Globalization - - - Policy

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