BrExit and foreign investment in the UK

Karoglou, Michail and Driffield, Nigel L (2018). BrExit and foreign investment in the UK. Journal of the Royal Statistical Society, Series A (Statistics in Society) ,

Abstract

We explore the likely impact of BrExit on inward foreign direct investment (FDI) through its possible effect on the benchmark variables that characterise the macroeconomy. To this aim we propose the use of a Markov regime-switching structural vector autoregression (MRS-SVAR) to distinguish between the volatile and stable states of the economy and account, amongst 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 impact on FDI. FDI growth may be positively affected (at most) by a sterling depreciation after a BrExit only if this event drives the UK economy to a period of highly volatile growth, inflation, interest and exchange rates, a scenario rather unlikely. And even then, the sterling depreciation benefits would only last for a short period of time.

Publication DOI: https://doi.org/10.1111/rssa.12417
Divisions: Aston Business School > Economics finance & entrepreneurship
Additional Information: © 2018 Royal Statistical Society Funding: Leverhulme Trust. Grant Number: RF‐2013‐503
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Related URLs: https://rss.onl ... 1111/rssa.12417 (Publisher URL)
Accepted Date: 2018-10-02
Published Online Date: 2018-10-25
Authors: Karoglou, Michail ( 0000-0002-6730-504X)
Driffield, Nigel L

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