The Effect of Brexit on Bilateral Trade in Services Between the United Kindom and the European Union

Aleksandra Paciorek & Chiara Di Sarno

Student thesis: Master thesis

Abstract

The UK’s vote to leave the European Union prompted questions about the economic future of the UK, particularly international trade. We apply the gravity model to estimate the short- term effects of Brexit on bilateral trade flows in services over 2000-2012 between the UK and its main trading partners, with the focus on members of the EU. Based on the model, we found that the size of the economy, the EU membership, trade barriers and economic openness significantly affect bilateral trade in services. Furthermore, there is an unrealized trade potential between the UK and some of its EU partners, as well as the BRIC economies. There are also large negative short-term effects of Brexit on the forecasted bilateral trade in services. Finally, the Switzerland and the Norwegian models are the least detrimental exit scenarios for the UK.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final ThesisMSc in Finance and Investments, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2017
Number of pages114
SupervisorsAradhna Aggarwal