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The Impact of Brexit on Foreign Investment and Production

  • Ellen R. McGrattan
  • Andrea Waddle
American Economic Journal: Macroeconomics
vol. 12, no. 1, January 2020
(pp. 76-103)
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Abstract

Using simulations from a multicountry neoclassical growth model, we analyze several post-Brexit scenarios. First, the United Kingdom unilaterally imposes tighter restrictions on FDI and trade from other EU nations. Second, the European Union retaliates and imposes the same restrictions on the United Kingdom. Finally, the United Kingdom reduces restrictions on other nations during the post-Brexit transition. Model predictions depend crucially on the policy response of multinationals' investment in technology capital, accumulated know-how from investments in R&D, brands, and organizations used simultaneously in their domestic and foreign operations.

Citation

McGrattan, Ellen R., and Andrea Waddle. 2020. "The Impact of Brexit on Foreign Investment and Production." American Economic Journal: Macroeconomics, 12 (1): 76-103. DOI: 10.1257/mac.20170399

Additional Materials

JEL Classification

  • D25 Intertemporal Firm Choice: Investment, Capacity, and Financing
  • F13 Trade Policy; International Trade Organizations
  • F15 Economic Integration
  • F23 Multinational Firms; International Business
  • G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
  • O32 Management of Technological Innovation and R&D
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