We develop a multi-country general equilibrium model featuring (i) migration flows across borders; (ii) explicit supply chain networks both across sectors and across countries; (iii) services sector with a significant role in both production and trade; and (iv) a separate banking sector. We then carefully calibrate this model to the UK’s withdrawal from the EU, guided by the terms specified in the Trade and Cooperation Agreement (TCA), signed in December 2020. We find that supply networks aggravate the losses from trade disintegration significantly, raising the cost of Brexit, even in the absence of tariffs. We also quantify the effects of trade liberalisation between the UK and the third countries, revealing gains, yet, only at a fraction of the losses from the new frictions to the UK-EU trade. Importantly, losses from the UK's exit from the EU are not shared equally and fall disproportionately on low-skilled households.

This paper examines the asymmetry in global spillovers from Fed policy across tightening versus easing episodes several examples of which have been on display since the global financial crisis (GFC). We build a dynamic general equilibrium model featuring: (i) occasionally binding collateral constraints in the financial sector with significant cross-border exposure; and (ii) global supply chains, allowing us to match the asymmetry of spillovers across contractionary versus expansionary monetary policy shocks. We find clear asymmetries in the transmission of US monetary policy, with significantly larger spillovers during contractionary episodes under both conventional and unconventional monetary policy changes. Our results also reveal that the greater the size of international credit and supply chain networks and the policymakers’ aversion to exchange rate fluctuations in the rest of the world, the greater the spillover effects of US monetary policy shocks.