Creator: McGrattan, Ellen R. and Waddle, Andrea Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 542 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 UK. 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.
Keyword: United Kingdom, FDI, Foreign investment, European Union, and Brexit Subject (JEL): F41 - Open Economy Macroeconomics, O34 - Intellectual Property and Intellectual Capital, O33 - Technological Change: Choices and Consequences; Diffusion Processes, and F23 - Multinational Firms; International Business