Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/185397
Authors: 
Mikolajun, Irena
Viaene, Jean-Marie
Year of Publication: 
2018
Series/Report no.: 
CESifo Working Paper No. 7199
Abstract: 
In the struggle between the forces of free trade and the restrictive influence of insularism the latter recently seems to have the upper hand. This is illustrated by the referendum of June 23, 2016 where the United Kingdom (UK) voted to leave the European Union (EU). In this paper we evaluate the consequences of this event for EU integration. In particular, we analyze how the extent of EU economic integration would change once the UK leaves the Union. To that end we develop an integration benchmark that consists of the steady state production equilibrium characterized by arbitrage pricing and perfect factor mobility. We apply metrics to measure the distance between this benchmark and the data. We find that the integration in the EU is incomplete and its trend is non-linear while Brexit would not bring negative consequences to its development..
Subjects: 
Brexit
regional integration
Euclidean distance
factor mobility
arbitrage pricing
reflected geometric Brownian motion
JEL: 
E13
F15
F21
F40
O11
O53
O54
Document Type: 
Working Paper

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