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The Economic Consequences of the Brexit Vote

Author

Listed:
  • Benjamin Born

    (Centre For Economic Policy Research
    University of Bonn)

  • Gernot J. Müller

    (Centre For Economic Policy Research
    University of Tübingen)

  • Moritz Schularick

    (Centre For Economic Policy Research
    University of Bonn)

  • Petr Sedlacek

    (Centre For Economic Policy Research
    Centre for Macroeconomics (CFM)
    University of Oxford)

Abstract

This paper introduces a data-driven, transparent and unbiased method to calculate the economic costs of the Brexit vote in June 2016. We let a matching algorithm determine a combination of comparison economies that best resembles the growth path of the UK economy before the Brexit referendum. The economic cost of the Brexit vote is the difference in output between the UK economy and its synthetic doppelganger. We show that, contrary to public perception, by the third quarter of 2017 the economic costs of the Brexit vote are already 1.3% of GDP. The cumulative costs amount to almost 20 billion pounds and are expected to grow to more than 60 billion pounds by end-2018. We provide evidence that heightened policy uncertainty has already taken a toll on investment and consumption.

Suggested Citation

  • Benjamin Born & Gernot J. Müller & Moritz Schularick & Petr Sedlacek, 2017. "The Economic Consequences of the Brexit Vote," Discussion Papers 1738, Centre for Macroeconomics (CFM).
    • Handle: RePEc:cfm:wpaper:1738
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    References listed on IDEAS

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    Cited by:

    1. Holger Breinlich & Elsa Leromain & Dennis Novy & Thomas Sampson & Ahmed Usman, 2018. "The Economic Effects of Brexit: Evidence from the Stock Market," Fiscal Studies, John Wiley & Sons, vol. 39(4), pages 581-623, December.
    2. Kym Anderson & Glyn Wittwer, 2018. "Cumulative Effects of Brexit and Other UK and EU27 Bilateral FTAs on the World's Wine Markets," Wine Economics Research Centre Working Papers 2018-01, University of Adelaide, Wine Economics Research Centre.
    3. Hobijn, Bart & Nechio, Fernanda & Shapiro, Adam Hale, 2021. "Using Brexit to identify the nature of price rigidities," Journal of International Economics, Elsevier, vol. 130(C).
    4. Ilhamah Qiamy & Fahim Nawaz & Syed Umair Jalal, 2018. "The United Kingdom and Brexit: Implications, Consequences and Opportunities," Global Economics Review, Humanity Only, vol. 3(2), pages 1-11, December.
    5. Anderson, Kym & Wittwer, Glyn, 2018. "Cumulative Effects of Brexit and Other UK and EU27 Bilateral FTAs on the World’s Wine Markets," CEPR Discussion Papers 12621, Centre for Economic Policy Research.
    6. Hamdi Jbir, 2025. "Does financial stability communication affect financial asset prices? Evidence from the Bank of England's communication experiment," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 30(2), pages 1831-1855, April.
    7. Deyan Radev & Georgi Penev, 2022. "Brexit and the Fintech Revolution in Europe - Lessons from the Bulgarian Digital Finance Cluster," Bulgarian Economic Papers bep-2022-07, Faculty of Economics and Business Administration, Sofia University St Kliment Ohridski - Bulgaria // Center for Economic Theories and Policies at Sofia University St Kliment Ohridski, revised Aug 2022.
    8. Barry Eichengreen & William Jungerman & Mingyang Liu, 2020. "Brexit, the City of London, and the prospects for portfolio investment," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 47(1), pages 1-16, February.
    9. Paul J. J. Welfens & Tian Xiong, 2019. "Correction to: BREXIT perspectives: financial market dynamics, welfare aspects and problems from slower growth," International Economics and Economic Policy, Springer, vol. 16(1), pages 267-267, March.
    10. Tihana Škrinjarić, 2019. "Stock Market Reactions to Brexit: Case of Selected CEE and SEE Stock Markets," IJFS, MDPI, vol. 7(1), pages 1-14, January.
    11. Martin Braml & Gabriel Felbermayr, 2019. "Quo vadis, Brexitannia?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 72(02), pages 32-39, January.
    12. Catherine Georgiou, 2020. "The British Stock Market under the Structure of Market Capitalization Value: New Evidence on its Predictive Content," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 13(3), pages 56-69, December.
    13. Douch, Mustaph & Huw Edwards, T., 2021. "The Brexit policy shock: Were UK services exports affected, and when?," Journal of Economic Behavior & Organization, Elsevier, vol. 182(C), pages 248-263.
    14. Maricel Linares Giraldo & William Rodrigo Avenda�o Castro & Johanna Milena Mogrovejo Andrade, 2020. "Implicaciones geopolíticas y económicas del Brexit en la Unión Europea," Apuntes del Cenes, Universidad Pedagógica y Tecnológica de Colombia, vol. 36(70), pages 14-41.
    15. Kevin Ralston & Dawn Everington & Zhiqiang Feng & Chris Dibben, 2022. "Economic Inactivity, Not in Employment, Education or Training (NEET) and Scarring: The Importance of NEET as a Marker of Long-Term Disadvantage," Work, Employment & Society, British Sociological Association, vol. 36(1), pages 59-79, February.

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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
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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