Did Brexiteers consider the business cycle of the UK trading partners?

Agata Wierzbowska () and Massimiliano Porto
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Agata Wierzbowska: Kobe University
Massimiliano Porto: Ritsumeikan Asia Pacific University

SN Business & Economics, 2024, vol. 4, issue 10, 1-18

Abstract: Abstract Brexit and post-Brexit trade policies can mean the UK shoring away from Europe, especially given the participation of the UK in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Since the trading partners are located in a remote region, we consider relevant for the UK integration with the Asian region the synchronization of its trade with the partners’ business cycle. We consider eight trading partner economies: Australia, Canada, Japan, New Zealand, Singapore, who are currently among the members of the CPTPP, and India, South Africa, and South Korea. We employ the autoregressive distributed lag methodology for the three-variable model of UK exports to the aforementioned countries, the partner economy’s gross domestic product (GDP), and bilateral exchange rate. Additionally, in the case of Canada, Japan, Korea, and South Africa we introduce free trade agreement (FTA) dummies to check for the impact of the FTAs on UK exports, providing further implications for the potential effects of new FTAs. Given that the main results point at positive response of UK exports to the increase in a partner economy’s GDP in some countries only and little impact of trade agreement implementation, we suggest that the new British government should consider business cycle synchronization in its trade policy development.

Keywords: Brexit; Free trade agreements; Trade policy; ARDL; Business cycle; Bilateral exchange rate (search for similar items in EconPapers)
JEL-codes: F14 F15 F44 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s43546-024-00715-5

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