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Faculty of Economics

The impact of trade policy and exchange rate shocks on trade


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Title: The impact of trade policy and exchange rate shocks on trade

Sponsor: Economic and Social Research Council (ESRC)

Description: How will Brexit affect the development and growth of British manufacturing firms? Britain's popular referendum vote to exit from the European Union has created a great deal of uncertainty about the future of Britain's external trade relations with countries that belong to the European Union as well as with other major trading economies external to the EU, including the United States and China. With the government preparing for exit negotiations, little is known about the future external trade policy the UK government intends to establish with regard to European Union states as well as with non-EU countries. Two major and interrelated sources of uncertainty are (a) the future value of the pound sterling relative to the currencies of Britain's trading partners and (b) the future trade policy on imports into the UK as well as the future trade policy Britain's exports will face in the EU.

In this research project, we are conducting:

1. legal research on Britain's rights and obligations under the WTO and numerous bilateral investment treaties in order to focus the economic analysis of policy options (import tariffs, production subsidies) to those that the British government can legally use under international law;

2. economic research focused on trade policies, trade flows and trade impacts in order to predict the impact of Brexit and any proposed future trade agreements on British manufacturers that use imported inputs in their production, British firms that compete with imports in the UK market, on British exporters to EU and non-EU destinations and on workers and consumers in the UK; and

3. economic research on exchange rate pass through (ERPT) in order to forecast how changes in the value of the pound sterling will pass through into British import and export prices.

The UK in a Changing Europe website: http://ukandeu.ac.uk/



Principal investigator


Dr Meredith Crowley


Co-investigator


Dr Lorand Bartels

Post-doc research associate


Lu Han


PhD student


Oliver Exton

External member


Dr Huasheng Song

Published Papers

Crowley, M. A., Meng, N. and Song, H. Policy shocks and stock market returns: evidence from Chinese solar panels, (2019) Journal of the Japanese and International Economies
Corsetti, G., Mavroeidi, E., Thwaites, G. and Wolf, M. Step away from the zero lower bound: small open economies in a world of secular stagnation, (2019) Journal of International Economics
Corsetti, G., Dedola, L., Jarociński, M., Maćkowiak, B., and Schmidt, S. Macroeconomic stablization, monetary-fiscal interactions, and Europe's monetary union, (2018) European Journal of Political Economy
Crowley, M. A., Meng, N., and Song, H. Tariff scares: Trade policy uncertainty and foreign market entry by Chinese firms, (2018) Journal of International Economics
Crowley, M. A. and Hillman, J.A. Slamming the door on trade policy discretion? The WTO appellate body's ruling on market distortions and production costs in EU-Biodiesel (Argentina), (2018) World Trade Review
Corsetti, G., Kuester, K. and Müller, G. J. Fixed on Flexible Rethinking Exchange Rate Regimes after the Great Recession, (2017) IMF Economic Review
Corsetti, G. Comments on "Obstfeld and Rogoff's international macro puzzles: a quantitative assessment" by J. Eaton, S. Kortum and B. Neiman, (2016) Journal of Economic Dynamics and Control
Corsetti, G. and Dedola, L. The "mystery of the printing press" monetary policy and self-fulfilling debt crises, (2016) Journal of the European Economic Association

Blogs and Commentary

Bartels, L. Understanding the UK’s position in the WTO after Brexit (Part I – The UK’s status and its schedules), ICTSD
Bartels, L. Understanding the UK’s position in the WTO after Brexit (Part II – The consequences), ICTSD

Cambridge Working Papers in Economics

Alcover, M. and Crowley, M. A. China -- Broiler Products: Can the sum of the parts be less than the whole?, (2019) CWPE1985
Corsetti, G., Lafarguette, R. and Mehl, A. Fast Trading and the Virtue of Entropy: Evidence from the Foreign Exchange Market, (2019) CWPE1970
Corsetti, G., Eichengreen, B., Hale, G. and Tallman, E. The Euro Crisis in the Mirror of the EMS: How Tying Odysseus to the Mast Avoided the Sirens but Led Him to Charybdis, (2019) CWPE1914
Corsetti, G., Erce, A. and Uy, T. Debt Sustainability and the Terms of Official Support, (2018) CWPE1864
Corsetti, G., Crowley, M. A. and Han, L. Invoicing and Pricing-to-Market - A Study of Price and Markup Elasticities of UK Exporters, (2018) CWPE1860

Authored Book

Giancarlo, C., Feld, L.P., Lane, P.R., Reichlin, L A new start for the Eurozone: dealing with debt, (2015) Monitoring the Eurozone - CEPR

Chapter in Book

Bown, C. P. and Crowley, M. A. The empirical landscape of trade policy, (2016) in the book: Handbook of commercial policy, Volume 1 - Elsevier
Crowley, M. A. Why are safeguards needed in a trade agreement?, (2010) in the book: Law and econmics of contingent protection in international trade - Cambridge University Press
Corsetti, G., Dedola, L. and Leduc, S. Optimal monetary policy in open economies, (2010) in the book: Handbook of monetary economics - North-Holland
IMF Annual Research Conference - Published on - Wednesday 6th November 2019
Professor Giancarlo Corsetti will speak at The International Monetary Fund's Twentieth Jacques Polak Annual Research Conference, which is being held at the IMF headquarters in Washington DC on 7th-8th November 2019. Prof. Corsetti's talk will be on his paper "Debt Sustainability and the Terms of Official Support", joint with Aitor Erce (European Investment Bank) and Timothy Uy (Deloitte).

The Zombie Economy - Published on - Tuesday 5th November 2019
Dr. Meredith Crowley's research "Renegotiation of Trade Agreements and Firm Exporting Decisions: Evidence from the Impact of Brexit on UK Exports", joint with Oliver Exton and Lu Han, was cited in the article "The Zombie Economy" in The Economist.

Passing a Brexit Deal Could Still End in No Deal - Published on - Sunday 27th October 2019
Dr. Meredith Crowley was quoted in The New York Times article "Getting Brexit Deal Over Finish Line Would Only Begin a Torturous New Race", which predicts that should Parliament pass the current Brexit deal, then this would only be the start of tough trade deal negotiations with the EU, that would more than likely end in a no deal outcome.

Uncertainty's Effect on Business Investment - Published on - Saturday 26th October 2019
Dr. Meredith Crowley's research "Renegotiation of Trade Agreements and Firm Exporting Decisions: Evidence from the Impact of Brexit on UK Exports", joint with Oliver Exton and Lu Han, was cited in the article "How Uncertainty Hits Business Investment" in The Financial Times.

UK Eyes Post-Brexit Trade Deal with Japan - Published on - Thursday 17th October 2019
Dr. Meredith Crowley was quoted in the Japan Times article "As UK eyes post-Brexit trade deal with Japan, its hand may not be as strong as it thinks", discussing the prospects for a Japan-UK Free Trade Agreement post-Brexit.

UK Tweaks Tariffs Amid No-Deal Brexit Countdown - Published on - Thursday 10th October 2019
Dr. Meredith Crowley was quoted in the Guardian newspaper article "UK tweaks tariffs amid no-deal Brexit countdown", which looks at the recent changes made to the temporary tariff schedule by Department for International Trade, in preparation for the UK leaving the EU.

UK Revises No Deal Tariffs - Published on - Tuesday 8th October 2019
Dr. Meredith Crowley was on BBC Radio 4's Today Programme discussing the government's new plan for tariffs under a no deal Brexit. You can listen to the programme on the BBC website (starts at 1h 46m).

Brexit and Global Trade - Published on - Tuesday 1st October 2019
Dr. Meredith Crowley was quoted in The New York Times article "Global Trade is Deteriorating Fast and Sapping the World’s Economy", regarding the negative impact that Brexit is having on the growth of global trade.

The chilling economic effects of Brexit uncertainty are intensifying - Published on - Tuesday 27th August 2019
Dr. Meredith Crowley, Oliver Exton, and Lu Han's paper "Renegotiation of Trade Agreements and Firm Exporting Decisions: Evidence from the Impact of Brexit on UK Exports", which looks into the effect of Brexit on exports, has been quoted by the Economist.

Fast Trading and the Virtue of Entropy - Published on - Wednesday 14th August 2019
Professor Giancarlo Corsetti, Romain Lafarguette and Arnaud Mehl have published an article for VOXeu titled "Fast Trading and the Virtue of Entropy". This column argues that high-frequency trading can increase market efficiency and the quality of trade.

What Free Ports Can and Can’t Achieve - Published on - Friday 9th August 2019
Dr. Meredith Crowley was quoted in The Economist article "What free ports can and can’t achieve", regarding the government's new policy to create free ports or free trade zones. It is proposed there will be ten of the new tariff-free zones around the UK, post-Brexit.

Freeports Advisory Panel - Published on - Monday 5th August 2019
Dr. Meredith Crowley has been appointed to serve on the Freeports Advisory Panel at the Department for International Trade under Secretary of State Liz Truss. This Panel has been set up to ensure the UK is ready to trade post-Brexit.

Fast Trading and the Virtue of Entropy - Published on - Wednesday 31st July 2019
Professor Giancarlo Corsetti has just published a paper in the European Central Bank's (ECB) Working Paper Series. The paper "Fast Trading and the Virtue of Entropy: Evidence from the Foreign Exchange Market" is joint with Romain Lafarguette and Arnaud Mehl.

Debt Sustainability Assessments - The State of the Art - Published on - Wednesday 17th July 2019
Professor Giancarlo Corsetti was invited to discuss "Debt Sustainability Assessments - The State of the Art" at the International Monetary Fund, by the IMF Strategy and Policy Review Department, on July 15th 2019.

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