Brexit and the cost of living: a tale of two phases

Federico Di Pace, Giacomo Mangiante and Riccardo Masolo ()
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Riccardo Masolo: Università Cattolica del Sacro Cuore

No def147, DISCE - Working Papers del Dipartimento di Economia e Finanza from Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE)

Abstract: We employ Synthetic Control Method techniques to estimate the causal effect of Brexit on the consumer price index (CPI) in the United Kingdom. We construct a counterfactual CPI index from a weighted pool of comparable economies and find that the price level of the United Kingdom rose approximately 7 percentage points more than its synthetic counterpart, between 2016Q2 and 2024Q4. This accounts for over a quarter of total inflation during the period. We attribute about 2 percentage points of this increase to the depreciation of the British pound after the Referendum and the remaining 5 percentage points to the change in trading relationships that ensued the 2021 Trade and Cooperation Agreement.

Keywords: Brexit; Exchange Rate; Trade Barriers and Consumer Prices. (search for similar items in EconPapers)
JEL-codes: C32 E31 F13 G10 (search for similar items in EconPapers)
Pages: 19
Date: 2025-12
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