DP14253 The Global Impact of Brexit Uncertainty
Author(s): | Tarek Alexander Hassan, Stephan Hollander, Ahmed Tahoun, Laurence van Lent |
Publication Date: | December 2019 |
Date Revised: | March 2021 |
Keyword(s): | Brexit, cross-country effects, Machine Learning, sentiment, uncertainty |
JEL(s): | D8, E22, E24, E32, E6, F0, G18, G32, G38, H32 |
Programme Areas: | Financial Economics, International Macroeconomics and Finance, Macroeconomics and Growth |
Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=14253 |
We propose a text-based method for measuring and analyzing the international propagation of uncertainty shocks at the firm level. We apply this method to estimate the impact of Brexit-related uncertainty and find widespread reverberations on listed firms in 81 countries. International firms most exposed to Brexit uncertainty not only significantly lost market value but also reduced hiring and investments. In addition to Brexit uncertainty (the second moment), we find that international firms overwhelmingly expected negative direct effects from Brexit (the first moment). Most prominently, firms expected difficulties from regulatory divergence, reduced labor mobility, and limited trade access.