NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Brexit Uncertainty and Trade Disintegration

Alejandro Graziano, Kyle Handley, Nuno Limão

NBER Working Paper No. 25334
Issued in December 2018
NBER Program(s):International Trade and Investment

We estimate the uncertainty effects of preferential trade disagreements. Increases in the probability of Britain’s exit from the European Union (Brexit) reduce bilateral export values and trade participation. These effects are increasing in trade policy risk across products and asymmetric for UK and EU exporters. We estimate that a persistent doubling of the probability of Brexit at the average disagreement tariff of 4.5% lowers EU-UK bilateral export values by 15 log points on average, and more so for EU than UK exporters. Neither believed a trade war was likely.

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Document Object Identifier (DOI): 10.3386/w25334

 
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