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Effects on real consumption in the UK and EU27 in different Brexit scenarios

Note: Simulation of scenarios as in G. Felbermayr, J. Gröschl, M. Steininger: Quantifying Brexit: From Ex-post to Ex-ante using Structural Gravity, CESifo Working Paper No. 7357, 2018, CESifo; additionally: hard-but-smart scenario as described above. All effects are statistically significant from zero at the 5 percent level. In all scenarios it is assumed that the UK will no longer pay net contributions to the EU (2015: 0.25 percent of GDP) and that the EU will spread this loss evenly across all remaining members. The disequilibrium in the trade balance between the EU and the UK is taken into account, but is kept constant. Perfectly flexible exchange rates. The approach takes into account, that NTB reductions within the EU to date have been heterogeneous according to econometric data analysis. The model covers 22 goods and 28 services industries and 44 countries (more than 90% of world GDP). S1 (Hard Brexit): MFN duties and NTB on both sides and UK vis-à-vis existing free trade partners; S2: as S1, but the UK concludes free trade agreements with the Commonwealth countries and the USA; S3: as S1, but the UK concludes free trade agreements with the EU (modelled on EU-Canada); S4: like S1, but the UK renounces all tariffs erga omnes and does not increase NTB tariffs vis-à-vis the EU and existing free trade partners. Details for 44 countries are listed in Table 1 in the Annex.
Source: G. Felbermayr, J. Gröschl, M. Steininger: Quantifying Brexit: From Ex-post to Ex-ante using Structural Gravity, CESifo Working Paper No. 7357, 2018, CESifo; calculations by the author.