The Analysis of Impact of Brexit on the Post-Brexit EU Using Intervented Multivariate Time Series

The UK is the most important partner of the EU in terms of economic and other fields due to the geographical proximity. It was one of the largest economies in the EU and its per capita income is higher than the EU average, so it is a net contributor to the EU. With UKs membership of the EU ended on 31 January 2019, there are concerns that the Brexit may have a significant impact on the EU, resulting in social, economic, political, and institutional changes, etc. in EU. While the impact of Brexit on the UK has always been the subject of considerable scholarly interest in recent years, there is relatively little literature on the impact of Brexit on the EU. This paper focuses on the evaluation of the impact of Brexit on the EU economy and other relevant aspects along three dimensions: GDP, PPP, Quarterly GDP growth. Employing powerful quantitative analysis technology that includes vector autoregression model, multivariate time series model with intervention variables, and autoregression integrated moving average, this paper obtains the important and novel evidence about the potential impact of Brexit on the EU economy, pointing out that Brexit is of far-reaching significance to the EU. This analysis uses several statistical models to screen out several key influencing factors, which can be used to predict the total GDP of EU in the next five years. The results show that EU economy will react negatively to “no-deal” Brexit, and its growth rate of economy will slow down significantly in next 5 years. Finally, we put forward relevant policy suggestions on how to deal with the negative impact of Brexit on EU.