Brexit and macroprudential regulation: a DSGE perspective

  • Jürgen Jerger
  • Jenny Körner
Original Paper


This paper uses a small and simple theoretical DSGE model in order to conduct some exercises in comparative dynamics of shocks that can be associated with Brexit. We do so by comparing two policy environments, one where a flexible macroprudential regulation (FMR) is in place and one, where this is not the case. This enables us to evaluate whether and to what extent FMR helps to mitigate the Brexit related shocks. We conclude that FMR would indeed be helpful, although in quantitative terms only slightly so.



We are grateful for comments of participants of the workshop “The Influence of Brexit on the EU28: Banking and Capital Market Adjustments plus Macro Perspectives” on October 12, 2018 in Frankfurt/Main.


  1. Aliber RZ, Kindleberger CP (2017) Manias, panics, and crashes: a history of financial crises, 7th ednGoogle Scholar
  2. Bank of England (2018) EU withdrawal scenarios and monetary and financial stability A response to the House of Commons Treasury Committee. (November), 1–88Google Scholar
  3. Borio CEV, Shim I (2008) What can (macro-) prudential policy do to support monetary policy?Google Scholar
  4. Busch B, Matthes J (2016) Brexit-the economic impact: a meta-analysis. Technical report, IW-ReportGoogle Scholar
  5. Dehmej S, Couppey-Soubeyran J (2017, 06) The role of macro-prudential policy in the prevention and correction of imbalances in the euro area. Technical reportGoogle Scholar
  6. Farhi E, Werning I (2016) A theory of macroprudential policies in the presence of nominal rigidities. Econometrica 84(5):1645–1704CrossRefGoogle Scholar
  7. Grossman GM, Rossi-Hansberg E (2008) Trading tasks: a simple theory of offshoring. American Economic ReviewGoogle Scholar
  8. Guerrieri L, Iacoviello M (2015) OccBin: a toolkit for solving dynamic models with occasionally binding constraints easily. J Monet Econ 70:22–38CrossRefGoogle Scholar
  9. Iacoviello M, Neri S (2010) Housing market spillovers: evidence from an estimated DSGE Model. Amer Econ J Macroecon 2:125–164CrossRefGoogle Scholar
  10. Jerger J, Körner J (2018) Assessing macroprudential regulation: the role of the zero lower bound. Appl Econ Lett 25(9):580–583CrossRefGoogle Scholar
  11. Klingelhöfer J, Sun R (2017) Macroprudential policy, central banks and financial stability: evidence from ChinaGoogle Scholar
  12. Korinek A, Simsek A (2016) Liquidity trap and excessive leverage. Amer Econ Rev 106(3):699–738CrossRefGoogle Scholar
  13. Lambertini L, Mendicino C, Punzi MT (2013) Leaning against boom-bust cycles in credit and housing prices. J Econ Dyn Control 37(8):1500–1522CrossRefGoogle Scholar
  14. Minsky HP (1977) The financial instability hypothesis: an interpretation of Keynes and an alternative to “standard” theory. ChallengeGoogle Scholar
  15. Patel O, Reh C (2016) Brexit: the consequences for the EU’s political system. UCL Constitution Unit Briefing Paper 1–5Google Scholar
  16. Rubio M, Carrasco-Gallego JA (2015) Macroprudential and monetary policy rules: a welfare analysis. Manch Sch 83(2):127–152CrossRefGoogle Scholar
  17. Rubio M, Yao F (2017) Macroprudential policies in a low interest-rate environment. Working Paper (April 2017)Google Scholar
  18. Schoof U, Petersen T, Aichele R, Felbermayr G (2015) Brexit ? potential economic consequences if the UK exits the EU. Bertelsmann StiftungGoogle Scholar
  19. von Hayek FA (2007) Die Theorie komplexer Phänomene. In: Gesammelte Schriften, A 1, Wirtschaftstheorie und WissenGoogle Scholar
  20. Wadsworth J, Dhingra S, Ottaviano G, Van Reenen J (2016) Brexit and the impact of immigration on the UK. CEP Brexit Anal 5:34–53Google Scholar

Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.University of RegensburgRegensburgGermany
  2. 2.Leibniz Institute for East and Southeast European StudiesRegensburgGermany
  3. 3.European Central BankFrankfurtGermany

Personalised recommendations