The United Kingdom’s Brexit vote leads to a major economic shock

Policy Brief

This Policy Viewpoint projects the economic impact over the next five years of the United Kingdom’s recent vote for Brexit. It is not based, however, on any agreement during this period between the EU and the UK on the latter’s terms of exit.

For comparison purposes, this publication simply juxtaposes the results from a Brexit-based scenario to those drawn from a Baseline Scenario that assumes the non-Brexit condition of ‘Business as Usual’.  Both scenarios are based on using the CAM global macro-econometric model (see, for example, the recent FEPS CAM-based Policy Brief on Global and European Imbalances, XX July 2016).

The Brexit scenario is based on making a small set of reasonable assumptions, mainly with regard to investment, consumption and the exchange rate (see similar assumptions made in the ‘Managing Chaos’ article in The Economist, July 2-8).

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