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Brexit Uncertainty and Its (Dis)service Effects

  • Saad Ahmad
  • Nuno Limão
  • Sarah Oliver
  • Serge Shikher
American Economic Journal: Economic Policy
vol. 15, no. 4, November 2023
(pp. 459-85)
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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.

Citation

Ahmad, Saad, Nuno Limão, Sarah Oliver, and Serge Shikher. 2023. "Brexit Uncertainty and Its (Dis)service Effects." American Economic Journal: Economic Policy, 15 (4): 459-85. DOI: 10.1257/pol.20200808

Additional Materials

JEL Classification

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