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Brexit (probability) and effects on financial market stability

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  • Krause, Thomas
  • Noth, Felix
  • Tonzer, Lena

Abstract

[Background] On 23 June 2016, there will be a referendum in the United Kingdom (UK) on the stay of the country in the European Union (EU). Based on recent poll data, the share of supporters and opponents of an exit varies around 50% (see Figure 1). Opponents of the UK breaking up with Brussels („Brexit“) refer to high costs in terms of stagnating economic growth if the UK leaves the EU. The risk of reduced trade, declining foreign direct investment, and a lower degree of financial market integration is high following an exit of the “single market”. Supporters of the leave campaign suppose that costs of a Brexit should not be that high. They see the advantage of increased flexibility in decision making if the UK no longer has to adhere to directives coming from Brussels. Also financial markets are concerned about the upcoming referendum. This study analyses the reaction of different financial market indicators to poll results pointing toward a Brexit.

Suggested Citation

  • Krause, Thomas & Noth, Felix & Tonzer, Lena, 2016. "Brexit (probability) and effects on financial market stability," IWH Online 5/2016, Halle Institute for Economic Research (IWH).
  • Handle: RePEc:zbw:iwhonl:52016
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    1. Daron Acemoglu & Tarek A. Hassan & Ahmed Tahoun, 2018. "The Power of the Street: Evidence from Egypt’s Arab Spring," Review of Financial Studies, Society for Financial Studies, vol. 31(1), pages 1-42.
    2. Erik Snowberg & Justin Wolfers & Eric Zitzewitz, 2007. "Partisan Impacts on the Economy: Evidence from Prediction Markets and Close Elections," The Quarterly Journal of Economics, Oxford University Press, vol. 122(2), pages 807-829.
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    1. repec:kap:iecepo:v:16:y:2019:i:1:d:10.1007_s10368-018-00423-0 is not listed on IDEAS
    2. Ansgar Belke & Irina Dubova & Thomas Osowski, 2018. "Policy uncertainty and international financial markets: the case of Brexit," Applied Economics, Taylor & Francis Journals, vol. 50(34-35), pages 3752-3770, July.
    3. Baumann, Alexendra & Wohlrabe, Klaus, 2019. "Publikationen von Wirtschaftsforschungsinstituten im deutschsprachigen Raum - Eine bibliometrische Analyse
      [Publications of Economic Research Insitutes in the German Speaking Area - A bibliometric
      ," MPRA Paper 92240, University Library of Munich, Germany.
    4. Samir Kadiric & Arthur Korus, 2018. "Effects of Brexit on Corporate Yield Spreads: Evidence from UK and Eurozone Corporate Bond Markets," EIIW Discussion paper disbei251, Universitätsbibliothek Wuppertal, University Library.

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