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Modelling events: The short-term economic impact of leaving the EU

Author

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  • Baker, Jessica
  • Carreras, Oriol
  • Kirby, Simon
  • Meaning, Jack
  • Piggott, Rebecca

Abstract

This paper presents a framework for modelling important socio-economic events in order to provide an informative counterfactual. This involves mapping the deep underlying shock associated with the event itself into a series of more tractable shocks consistent with the model being applied and calibrated from data, existing literature or ancillary analysis. The results should then be subject to testing of their sensitivity to the assumptions made. As a practical example, the paper uses the National Institute's Global Econometric Model (NiGEM) to consider the short-term economic impact to the UK of leaving the European Union. We find that the UK economy would be around 2 1/2% smaller 2years after a decision to leave the EU when compared to the counterfactual of deciding to remain a member.

Suggested Citation

  • Baker, Jessica & Carreras, Oriol & Kirby, Simon & Meaning, Jack & Piggott, Rebecca, 2016. "Modelling events: The short-term economic impact of leaving the EU," Economic Modelling, Elsevier, vol. 58(C), pages 339-350.
    • Handle: RePEc:eee:ecmode:v:58:y:2016:i:c:p:339-350
    DOI: 10.1016/j.econmod.2016.06.012
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    Cited by:

    1. Joseph B. Steinberg, 2020. "The macroeconomic impact of NAFTA termination," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(2), pages 821-865, May.
    2. Amit Kara, 2017. "Infrastructure in the UK: Time to Rebuild?," National Institute of Economic and Social Research (NIESR) General Election Briefings, National Institute of Economic and Social Research, issue 3, May.
    3. Baker, Jessica & Carreras, Oriol & Kirby, Simon & Meaning, Jack & Piggott, Rebecca, 2016. "Modelling events: The short-term economic impact of leaving the EU," Economic Modelling, Elsevier, vol. 58(C), pages 339-350.
    4. Pitsoulis, Athanassios & Schwuchow, Soeren, 2018. "Though this be madness: A game-theoretic perspective on the Brexit negotiations," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181635, Verein für Socialpolitik / German Economic Association.
    5. Adele Bergin & Abian Garcia-Rodriguez & Edgar L. W. Morgenroth & Donal Smith, 2017. "Modelling the Medium- to Long-Term Potential Macroeconomic Impact of Brexit on Ireland," The Economic and Social Review, Economic and Social Studies, vol. 48(3), pages 305-316.
    6. Stefan Schiman-Vukan, 2016. "Weltwirtschaft durch EU-Austritt Großbritanniens kaum beeinträchtigt. Mittelfristige Prognose bis 2021," WIFO Monatsberichte (monthly reports), WIFO, vol. 89(10), pages 717-727, October.
    7. Ebell, Monique & Hurst, Ian & Warren, James, 2016. "Modelling the long-run economic impact of leaving the European Union," Economic Modelling, Elsevier, vol. 59(C), pages 196-209.
    8. Gern, Klaus-Jürgen & Stolzenburg, Ulrich, 2016. "Zum Szenario eines Austritts des Vereinigten Königreichs aus der EU (Brexit)," Kiel Insight 2016.16, Kiel Institute for the World Economy (IfW Kiel).
    9. Steinberg, Joseph B., 2019. "Brexit and the macroeconomic impact of trade policy uncertainty," Journal of International Economics, Elsevier, vol. 117(C), pages 175-195.
    10. Makram El-Shagi & Steven Yamarik, 2023. "Growth Effects of EU Expansion: A Penalized Synthetic Control Method," CFDS Discussion Paper Series 2023/4, Center for Financial Development and Stability at Henan University, Kaifeng, Henan, China.
    11. Bagnai, Alberto & Granville, Brigitte & Mongeau Ospina, Christian A., 2017. "Withdrawal of Italy from the euro area: Stochastic simulations of a structural macroeconometric model," Economic Modelling, Elsevier, vol. 64(C), pages 524-538.
    12. László Békési & Zsolt Kovalszky & Tímea Várnai, 2017. "Scenarios for potential macroeconomic impact of Brexit on Hungary," MNB Occasional Papers 2017/125, Magyar Nemzeti Bank (Central Bank of Hungary).
    13. Christian Grimme & Magnus Reif & Timo Wollmershäuser, 2016. "Die Auswirkungen des britischen Votums für einen Brexit auf die deutsche Konjunktur 2016/17," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 69(13), pages 38-43, July.
    14. Döhrn, Roland & Rujin, Svetlana, 2017. "Unsicherheit über Brexit-Modalitäten prägt Konjunktur in Großbritannien," RWI Konjunkturberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, vol. 68(3), pages 49-65.
    15. Ali-Yrkkö, Jyrki & Kuusi, Tero, 2019. "Brexit and Indirect Impact Routes through Global Value Chains," ETLA Reports 89, The Research Institute of the Finnish Economy.
    16. Boysen-Hogrefe, Jens & Gern, Klaus-Jürgen & Hauber, Philipp & Kooths, Stefan & Stolzenburg, Ulrich, 2016. "Weltkonjunktur im Sommer 2016 - Wieder etwas stärkere Expansion der Weltwirtschaft [World Economy Summer 2016 - World Economy with somewhat more steam]," Kieler Konjunkturberichte 19, Kiel Institute for the World Economy (IfW Kiel).

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    More about this item

    Keywords

    Macroeconomic modelling; Uncertainty; Risk premia; Investment;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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