Brexit? Economic Perspectives on Britain's EU Membership

The University of Warwick's Centre for Competitive Advantage in the Global Economy (CAGE), event on policy dialogue on the Economic Perspectives on Britain's EU Membership.

The discussion evolved around three axes:

• What has EU membership meant for UK economic performance?
• The UK outside the Economic and Monetary Union: monetary policy links between the European Central Bank and the Bank of England
• EU regional policy: A critical appraisal and a view from the UK

In further detail:

• What Has EU Membership Meant for UK Economic Performance? By Professor Nicholas Crafts

The presentation focused on of implications for the growth of the UK economy from its EU membership. It is argued that there has been a substantial positive effect on the level of GDP per person, but not on the rate of growth. The income gain far exceeds both the ‘membership fee’ and the ex-ante expectations of economists in the 1970s. The positive effect comes because the EU has been far more effective than European Free Trade Association in achieving deep economic integration and higher volumes of trade. A particularly important influence on UK productivity performance has come through the increased competition associated with the reduction in trade costs consequent on EU membership. Further positive effects can be expected if greater economic integration reduces non-tariff barriers in future. Brexit would likely entail giving up some but not necessarily all of these gains.

• The UK outside the Economic and Monetary Union: monetary policy links between the European Central Bank and the Bank of England - By Professor Vera Troeger

We argue that the European Currency Union reduced the de facto monetary policy autonomy of EU countries abstaining from introducing the Euro like the UK. The presentation hinges on the trade-off between monetary policy autonomy in order to counterbalance country specific economic shocks and the need for a stable exchange rate with the main trading partner, in this case the Eurozone, in order to avoid the import of inflation or a declining competitiveness of the domestic industry.The empirical analysis shows that in “normal” times the latter policy goal (exchange rate stability) dominates the first (counterbalancing economic shocks). Analising the short-term adjustments of central bank interest rates in three EU countries which did not introduce the Euro (UK, Sweden and Denmark), we show that these countries’ monetary policies more closely follow the ECB’s policy than they had followed the Bundesbank’s policy before 1994. In times of economic crises the balance might be shifted towards counterbalancing economic shocks. We therefore use data from the recent economic crisis to analyse whether monetary policy in the UK diverges to a larger extend from EMU monetary policy when a financial crisis affects the domestic economy.

• EU Regional Policy: A Critical Appraisal and a View from the UK - By Professor Sascha O. Becker

The presentation included an analysis of the EU Regional Policy during four programming periods: 1989-1993, 1994-1999, 2000-2006, 2007-2013. When looking at all periods, the focus is on the growth, employment and investment effects of objective treatment status. For the two later periods, we additionally look at the effects of the volume of EU transfers, overall and in sub-categories, on various outcomes. We pay particular attention to the role of EU funding for UK regions and relate this to the debate on Britain's In/Out referendum.

The presentations was followed by a policy debate moderated by Mr Geoff Meade and attended by colleagues from the European Commission and the European Investment Bank.