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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: 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:

Principal investigator

Dr Meredith Crowley


Dr Lorand Bartels

Post-doc research associate

Lu Han

PhD student

Oliver Exton

External member

Dr Huasheng Song

Published Papers

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, C., 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
Bown, C. P. and Crowley, M. Emerging economies, trade policy, and macroeconomic shocks, (2014) Journal of Development Economics
Crowley, M. Tuna-dolphin II: a legal and economic analysis of the appellate body report, (2014) World Trade Review

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

Corsetti, G. and Erce, A. Debt Sustainability and the Terms of Official Support, (2018) CWPE1864
Corsetti, G., Crowley, M. and Han, L. Invoicing and Pricing-to-Market - A Study of Price and Markup Elasticities of UK Exporters, (2018) CWPE1860
Crowley, M. A., Exton, O.… and Han, L. Renegotiation of Trade Agreements and Firm Exporting Decisions: Evidence from the Impact of Brexit on UK Exports, (2018) CWPE1839
Ari, A., Corsetti, G. and Dedola, L. Debt Seniority and Sovereign Debt Crises, (2018) CWPE1831
Crowley, M. Understanding the challenges to the world trading system, (2018) CWPE1825

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, Meredith 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
Are Freeports the Future? - Published on - Friday 30th November 2018
Dr. Meredith Crowley discusses 'freeports' and the role they might play in a post-Brexit manufacturing boom on BBC Radio 4's In Business Programme (starts at 1m 47s).

Debt Sustainability: The State of the Art - Published on - Monday 26th November 2018
Professor Giancarlo Corsetti's debt sustainability report has been published by European Parliament. The landmark report highlights three critical areas limiting the effectiveness of current Debt Sustainability Assessments – liquidity risks, contagion risks and identification of debt limits – and sets out a plan for how the European assessment system can be reformed.

New Economics of Exchange Rate Adjustment - Event Date - Thursday 21st March 2019 - Friday 22nd March 2019
Cambridge-INET are holding an event "New Economics of Exchange Rate Adjustment" on 21st and 22nd March 2018, from 9.00am - 5.00pm, in The Elton-Bowring Room, Clare College, Cambridge. Please register you interest.

European Leaders Talk Brexit In Austria - Published on - Thursday 20th September 2018
Dr. Meredith Crowley was interviewed for NPR's Morning Edition on Brexit. "With just six months to go before Britain leaves the EU, European leaders are meeting in Austria to discuss progress". You can listen to the program on the NPR site.

Counting the Costs of Brexit Uncertainty - Published on - Monday 10th September 2018
The Financial Times (subscription required) have quoted the report authored by Dr. Meredith Crowley, Oliver Exton and Lu Han in an article about the impact of Brexit on UK exports.

Brexit Uncertainty Damages Britain’s Exporters - Published on - Tuesday 28th August 2018
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" has been quoted in articles by both The Economist and The Telegraph.

UK-Asia Trade in the Event of “no deal” Brexit - Published on - Thursday 23rd August 2018
Dr. Meredith Crowley was interviewed on BBC World News TV's Impact program “The prospects for UK-Asia trade in the event of a “no deal” Brexit,” presented by Yalda Hakim and broadcast on 23 August 2018.

Trade Uncertainty - Published on - Tuesday 31st July 2018
The Telegraph has quoted the research by Dr. Meredith Crowley, Oliver Exton and Lu Han in their article "Britain loses thousands of exporters on trade uncertainty".

President Trump's Trade War - Published on - Thursday 19th July 2018
Dr. Meredith Crowley was interviewed by BloombergTV Bulgaria on 13th July 2018. She discussed President Trump's Trade War. Please note the article and video are in Bulgarian.

UK in a Changing Europe awarded Best Think Tank - Published on - Wednesday 18th July 2018
UK in a Changing Europe has been awarded Best Think Tank covering Global Affairs in the UK by Prospect Magazine. Dr. Meredith Crowley, a Research Leader for UK in a Changing Europe, and Prof. Giancarlo Corsetti along with their co-investigator from Law, Lorand Bartels, contributed a number of policy analysis pieces that were cited as one of UK in a Changing Europe's major successes.

How the Brexit Vote Impacted Trade - Published on - Tuesday 17th July 2018
New research by Dr. Meredith Crowley, Oliver Exton and Lu Han examines how the Brexit vote impacted trade in 2016, "Renegotiation of Trade Agreements and Firm Exporting Decisions: Evidence from the Impact of Brexit on UK Exports".

United Nations High-Level Advisory Board - Published on - Monday 16th July 2018
Prof. Giancarlo Corsetti was invited to join the newly created United Nations High-Level Advisory Board on Economic Social Affairs. The board held its inaugural meeting on July 9th and 10th 2018.

UK-EU Future Customs Relationship - Published on - Monday 9th July 2018
As part of the UK in a Changing Europe programme, Dr. Meredith Crowley and Oliver Exton have written a paper on the UK-EU Future Customs Relationship as part of a report on "What the government’s Brexit white paper must address".

How does the US see Brexit? - Published on - Tuesday 19th June 2018
In this Royal Economic Society (RES) video Dr. Meredith Crowley looks at American attitudes, the potential for new trading partners and negative responses towards globalisation.

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