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The macroeconomic impact of UK withdrawal from the EU

Publication type: Journal article/book/chapter | Publication date: 22 Apr 2004 | NIESR Author(s): Pain, N; Young, G | JEL Classification: C3; F2; F4 | Journal: Economic Modelling No 3 Vol 21 | Pages: 387-408 | Publisher: Elsevier, Oxford

We contribute to the ongoing debate about the benefits to the UK economy of membership of the European Union by assessing the macroeconomic consequences of withdrawal using simulation analyses on the NIESR macroeconometric model of the UK economy under endogenous fiscal and monetary policies. We draw on research that highlights the role of EU policies in the level of international trade and investment undertaken by Member States, and the implications of those international linkages for long-term productive potential. UK living standards would be adversely affected by withdrawal, largely due to a decline in the level of technical efficiency resulting from a lower future level of inward foreign direct investment.