The Brexit vote, inflation and U.K living standards

Holger Breinlich, Elsa Leromain, Dennis Novy and Thomas Sampson

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This article studies how voting for Brexit affected living standards in the United Kingdom. Using heterogeneity in exposure to import costs across product groups, we analyze how the depreciation of sterling caused by the referendum affected consumer prices. We find that the Brexit depreciation led to higher inflation in product groups with greater import shares in consumer expenditure. Our results are consistent with complete pass-through of import costs to consumer prices and imply aggregate exchange rate pass-through of 0.29. We estimate the Brexit depreciation increased consumer prices by 2.9%, costing the average household £870 per year.

Keywords: Brexit; economic disintegration; import costs; inflation; trade policy; United Kingdom in a Changing Europe initiative under Brexit Priority Grant ES/R001804/1 and by the EOS programme of the Flemish (FWO) and French‐speaking (FRS‐FNRS) communities of Belgium (convention 30784531 on “Winners and Losers from Globalization and Market Integration: Insights from Micro‐Data; ES/R001804/1; CEP (search for similar items in EconPapers)
JEL-codes: L81 N0 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2022-02-01
New Economics Papers: this item is included in nep-int, nep-mon, nep-opm and nep-pol
References: Add references at CitEc
Citations: View citations in EconPapers (10)

Published in International Economic Review, 1, February, 2022, 63(1), pp. 63 - 93. ISSN: 1468-2354

Downloads: (external link)
http://eprints.lse.ac.uk/111602/ Open access version. (application/pdf)

Related works:
Journal Article: THE BREXIT VOTE, INFLATION AND U.K. LIVING STANDARDS (2022)
Working Paper: The Brexit Vote, Inflation and UK Living Standards (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:111602

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().