CFCM Seminar: Thomas Sampson (LSE)

The Brexit vote, inflation and UK livings standards (with Holger Breinlich, Elsa Leromain and Dennis Novy)

Abstract: This paper studies how voting to leave the European Union affected living standards in the United Kingdom. Using heterogeneity in exposure to import costs across product groups, we analyze the impact of the depreciation of sterling caused by the referendum on consumer prices. We show that inflation increased by more for product groups with higher import shares in consumer expenditure. Our results are consistent with complete pass-through of import costs to consumer prices and imply an aggregate exchange rate pass-through of 0.29. We estimate the Brexit vote increased consumer prices by 2.9 percent, costing the average household £870 per year.