Trade in Times of Uncertainty

Anna Matzner, Birgit Meyer and Harald Oberhofer

No 10284, CESifo Working Paper Series from CESifo

Abstract: This paper analyses the direct and indirect trade volume and trade cost effects of uncertainty on international trade and economic welfare using a structural gravity framework for a panel of 97 developed and developing countries from 2000 to 2018. Our results suggest that an increase in unilateral uncertainty affects average trade costs in a heterogeneous manner, depending on whether the uncertainty originates from the importing or exporting country. Moreover, using a cross-sectional gravity approach, we show that an uncertainty shock directly reduces cross-border trade flows. The paper illustrates the suitability of the proposed modeling approach by means of two counterfactual scenario analyses in which we calculate the general equilibrium trade and welfare effects of uncertainty induced by the unexpected outcome of the Brexit referendum in 2016 and the outbreak of the COVID-19 pandemic in 2020.

Keywords: international trade; trade costs; gravity; uncertainty; counterfactual scenario; analysis; Brexit; Covid-19 (search for similar items in EconPapers)
JEL-codes: E60 F13 F14 F42 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-int
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Related works:
Journal Article: Trade in times of uncertainty (2023)
Working Paper: Trade in Times of Uncertainty (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10284

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