Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/144934 
Year of Publication: 
2016
Citation: 
[Journal:] DIW Economic Bulletin [ISSN:] 2192-7219 [Volume:] 6 [Issue:] 32/33 [Publisher:] Deutsches Institut für Wirtschaftsforschung (DIW) [Place:] Berlin [Year:] 2016 [Pages:] 575-582
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
The Brexit vote has considerably increased economic uncertainty in Europe and beyond. It will likely affect economic performance and in particular investment in the euro area, which are both already relatively weak. The impact of this uncertainty shock on the euro area and the German economy is estimated with an econometric framework. A counterfactual analysis indicates that the uncertainty associated with the Brexit vote reduces GDP in the model economy for the euro area for more than two years, with a trough of about 0.2 percent after eight months, relative to a situation in which this shock would not have occurred. It also leads to an increase in the unemployment rate and to a mild decline of consumer prices. Investment is estimated to fall by approximately 0.7 percent over the horizon of one year. In Germany, these effects are qualitatively and quantitatively similar. The findings highlight the importance to stimulate investment in the euro area and in Germany, and to minimize uncertainty in the further political process.
Subjects: 
European Union
United Kingdom
investment
autoregressive models
JEL: 
E32
F15
C32
Document Type: 
Article

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