Macroprudential policies and Brexit: A welfare analysis

Margarita Rubio

No 2021/04, Discussion Papers from University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM)

Abstract: Brexit will bring many economic and institutional consequences. Among other, Brexit will have implications on financial stability and the implementation of macroprudential policies. One immediate effect of Brexit is the fact that the United Kingdom (UK) will no longer be subject to the jurisdiction of the European Supervisory Authorities (ESAs) nor the European Systemic Risk Board (ESRB). This paper studies the welfare implications of this change of regime, both for the UK and the European Union (EU). By means of a Dynamic Stochastic General Equilibrium model (DSGE), I compare the pre-Brexit scenario with the new one, in which the UK sets macroprudential policy independently. I find that, after Brexit, the UK is better off by setting its own macroprudential policy without taking into account Europe's welfare as a whole. Given the small relative size of the UK, this implies just slight welfare loss in the EU.

Keywords: Brexit; macroprudential policy; DSGE; welfare (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cba, nep-dge, nep-eec, nep-int, nep-mac and nep-ore
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Citations: View citations in EconPapers (1)

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Journal Article: Macroprudential policies and Brexit: A welfare analysis (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:not:notcfc:2021/04

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