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Brexit Uncertainty and Its (Dis)service Effects

Author

Listed:
  • Saad Ahmad
  • Nuno Limão
  • Sarah Oliver
  • Serge Shikher

Abstract

We estimate the impact of increased policy uncertainty from Brexit on UK trade in services. We apply an uncertainty-augmented gravity equation to UK services trade with the European Union at the industry level from 2016:I to 2018:IV. By exploiting the variation in the probability of Brexit from prediction markets interacted with a new trade policy risk measure across service industries, we identify a significant negative impact of the threat of Brexit on trade values and participation. The increased probability of Brexit in this period lowered services exports by at least 20 log points.

Suggested Citation

  • Saad Ahmad & Nuno Limão & Sarah Oliver & Serge Shikher, 2023. "Brexit Uncertainty and Its (Dis)service Effects," American Economic Journal: Economic Policy, American Economic Association, vol. 15(4), pages 459-485, November.
    • Handle: RePEc:aea:aejpol:v:15:y:2023:i:4:p:459-85
    DOI: 10.1257/pol.20200808
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    Citations

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    Cited by:

    1. Ana Venâncio & João Pereira dos Santos, 2021. "The effect of Brexit on British workers living in the EU," Working Papers REM 2021/0197, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    2. Kim, Jang-Chul & Mazumder, Sharif & Su, Qing, 2024. "Brexit's ripple: Probing the impact on stock market liquidity," Finance Research Letters, Elsevier, vol. 61(C).
    3. Martin, Julien & Mejean, Isabelle & Parenti, Mathieu, 2020. "Relationship stickiness, international trade, and economic uncertainty," CEPR Discussion Papers 15609, C.E.P.R. Discussion Papers.
    4. Rebecca Freeman & Kalina Manova & Thomas Prayer & Thomas Sampson, 2022. "UK trade in the wake of Brexit," CEP Discussion Papers dp1847, Centre for Economic Performance, LSE.
    5. Mustapha Douch & Terence Huw Edwards, 2022. "The bilateral trade effects of announcement shocks: Brexit as a natural field experiment," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(2), pages 305-329, March.
    6. Steven Buigut & Burcu Kapar, 2023. "How did Brexit impact EU trade? Evidence from real data," The World Economy, Wiley Blackwell, vol. 46(6), pages 1566-1581, June.

    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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