The Costs of Economic Nationalism: Evidence from the Brexit Experiment

Benjamin Born, Gernot Müller, Moritz Schularick and Petr Sedlacek

The Economic Journal, 2019, vol. 129, issue 623, 2722-2744

Abstract: Economic nationalism is on the rise, but at what cost? We study this question using the unexpected outcome of the Brexit referendum vote as a natural macroeconomic experiment. Employing synthetic control methods,we first show that the Brexit vote has caused a UK output loss of 1.7% to 2.5% by year-end 2018. An expectations-augmented VAR suggests that these costs are, to a large extent, driven by a downward revision of growth expectations in response to the vote. Linking quasi-experimental identification to structural time-series estimation allows us not only to quantify the aggregate costs but also to understand the channels through which expected economic disintegration impacts the macroeconomy.

Date: 2019
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Citations: View citations in EconPapers (108)

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Working Paper: The Costs of Economic Nationalism: Evidence from the Brexit Experiment (2017)
Working Paper: The Costs of Economic Nationalism: Evidence from the Brexit Experiment (2017)
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