Will the Future EU-UK Free Trade Agreement Affect Foreign Direct Investment?
Abstract This article aims to provide new insight on how Brexit will affect foreign direct investment (FDI) into the UK. By estimating an augmented gravity equation which accounts for the depth of free trade agreements (FTAs) as well as for EU and euro area membership, the article gauges the potenti...
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| Format: | Article |
| Language: | English |
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Springer
2020-07-01
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| Series: | Intereconomics |
| Online Access: | https://doi.org/10.1007/s10272-020-0911-3 |
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| author | Federico Carril-Caccia |
| author_facet | Federico Carril-Caccia |
| author_sort | Federico Carril-Caccia |
| collection | DOAJ |
| description | Abstract This article aims to provide new insight on how Brexit will affect foreign direct investment (FDI) into the UK. By estimating an augmented gravity equation which accounts for the depth of free trade agreements (FTAs) as well as for EU and euro area membership, the article gauges the potential impact that different EU-UK trade scenarios might have on FDI flows and stocks. Results show that under a no-deal scenario, FDI flows from the EU into the UK would plunge by 25.9% – 40.6%, and inward FDI stocks would decrease by 49.2% – 53.9%. However, the depth of the future FTA can mitigate this negative outcome. More generally, the article shows that the FDI costs of leaving the EU would be significantly higher for the euro area countries. |
| format | Article |
| id | doaj-art-039f95ea72dc457aa0c4e90b0f9839e4 |
| institution | Kabale University |
| issn | 0020-5346 1613-964X |
| language | English |
| publishDate | 2020-07-01 |
| publisher | Springer |
| record_format | Article |
| series | Intereconomics |
| spelling | doaj-art-039f95ea72dc457aa0c4e90b0f9839e42025-01-17T08:34:14ZengSpringerIntereconomics0020-53461613-964X2020-07-0155426627010.1007/s10272-020-0911-3Will the Future EU-UK Free Trade Agreement Affect Foreign Direct Investment?Federico Carril-Caccia0Department of Economics, University of DeustoAbstract This article aims to provide new insight on how Brexit will affect foreign direct investment (FDI) into the UK. By estimating an augmented gravity equation which accounts for the depth of free trade agreements (FTAs) as well as for EU and euro area membership, the article gauges the potential impact that different EU-UK trade scenarios might have on FDI flows and stocks. Results show that under a no-deal scenario, FDI flows from the EU into the UK would plunge by 25.9% – 40.6%, and inward FDI stocks would decrease by 49.2% – 53.9%. However, the depth of the future FTA can mitigate this negative outcome. More generally, the article shows that the FDI costs of leaving the EU would be significantly higher for the euro area countries.https://doi.org/10.1007/s10272-020-0911-3 |
| spellingShingle | Federico Carril-Caccia Will the Future EU-UK Free Trade Agreement Affect Foreign Direct Investment? Intereconomics |
| title | Will the Future EU-UK Free Trade Agreement Affect Foreign Direct Investment? |
| title_full | Will the Future EU-UK Free Trade Agreement Affect Foreign Direct Investment? |
| title_fullStr | Will the Future EU-UK Free Trade Agreement Affect Foreign Direct Investment? |
| title_full_unstemmed | Will the Future EU-UK Free Trade Agreement Affect Foreign Direct Investment? |
| title_short | Will the Future EU-UK Free Trade Agreement Affect Foreign Direct Investment? |
| title_sort | will the future eu uk free trade agreement affect foreign direct investment |
| url | https://doi.org/10.1007/s10272-020-0911-3 |
| work_keys_str_mv | AT federicocarrilcaccia willthefutureeuukfreetradeagreementaffectforeigndirectinvestment |