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Brexit and foreign investment in the UK
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Driffield, Nigel L. and Karoglou, Michail (2019) Brexit and foreign investment in the UK. Journal of the Royal Statistical Society: Series A (Statistics in Society) , 182 (2). pp. 559-582. doi:10.1111/rssa.12417
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Official URL: http://dx.doi.org/10.1111/rssa.12417
Abstract
We explore the likely effect of Brexit on inward foreign direct investment (FDI) through its possible effect on the benchmark variables that characterize the macroeconomy. For this we propose the use of a Markov regime switching structural vector auto‐regression to distinguish between the volatile and stable states of the economy and account, among other effects, for the contemporaneous effects that the frequency of FDI innately generates. Our findings suggest that, if Brexit triggers a sterling depreciation in the current economic climate, this will fuel a prolonged negative effect on FDI. FDI flows may be positively affected (at most) by a sterling depreciation after Brexit only if this event drives the UK economy to a period of highly volatile growth, inflation, interest and exchange rates: a scenario that is rather unlikely. And, even then, the sterling depreciation benefits would last for only a short period of time.
| Item Type: | Journal Article | ||||||||
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| Subjects: | H Social Sciences > HB Economic Theory | ||||||||
| Divisions: | Faculty of Social Sciences > Warwick Business School > Strategy & International Business Faculty of Social Sciences > Warwick Business School |
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| Library of Congress Subject Headings (LCSH): | European Union -- Great Britain, Investments, Foreign -- Great Britain, Balance of trade -- Great Britain, Autoregression (Statistics), Vector analysis | ||||||||
| Journal or Publication Title: | Journal of the Royal Statistical Society: Series A (Statistics in Society) | ||||||||
| Publisher: | Forschungsinstitut zur Zukunft der Arbeit | ||||||||
| ISSN: | 0964-1998 | ||||||||
| Official Date: | February 2019 | ||||||||
| Dates: |
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| Volume: | 182 | ||||||||
| Number: | 2 | ||||||||
| Page Range: | pp. 559-582 | ||||||||
| DOI: | 10.1111/rssa.12417 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Publisher Statement: | "This is the peer reviewed version of the following article: Driffield, N. and Karoglou, M. (2018), Brexit and foreign investment in the UK. J. R. Stat. Soc. A. . doi:10.1111/rssa.12417, which has been published in final form at https://doi.org/10.1111/rssa.12417. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions." | ||||||||
| Access rights to Published version: | Restricted or Subscription Access |
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