ASSESSING THE MACROECONOMIC IMPACT OF BREXIT THROUGH TRADE AND MIGRATION CHANNELS
by Antoine Berthou, Sophie Haincourt and Marie-Elisabeth de la Serve, Ángel Estrada, Moritz A. Roth and Alexander Kadow. Documentos Ocasionales. N.º 1911. Banco de España. 2019
Jueves 25 de noviembre de 2021, por Carlos San Juan
This joint work by the Bundesbank, the Banque de France and the Banco de España highlights
some of the numerous channels through which Brexit will affect the UK economy and its
economic partners. In particular, it focuses on trade and migration channels, adding a more
general assessment of exiting the EU through the use of a gravity model. The trade channel
alone may cut UK GDP by 2% over the medium term if the UK reverts to WTO rules, while a
more general gravity model would point to UK GDP falling by almost 6% compared to baseline.
According to our analysis, the ‘cost of non-Europe’ (such as originally stated by Cecchini’s
seminal work in 1988) lies therefore between 2% and 6% in terms of real GDP losses for
the UK. With the shock being largely asymmetric, the EA remains relatively unscathed by the
UK’s exit, with GDP less than 1% lower than baseline by 2023. The study also shows that
results are sensitive to the envisaged policy response. In general, monetary and fiscal policies
may act to cushion a Brexit-related shock; however, the potency of the policy response
depends on the underlying source of the shock.