Whose Policy Uncertainty Matters in the Trade between Germany and the United States: An Asymmetric Analysis

Mohsen Bahmani-Oskooee, Ridha Nouira and Sami Saafi

Applied Economics Quarterly (formerly: Konjunkturpolitik), 2021, vol. 67, issue 4, 287-309

Abstract: A few previous studies that assessed the impact of policy uncertainty on trade flows assumed that the effects are symmetric. In this paper we argue that since traders’ expectations differ when uncertainty rises versus when it declines, effects could be asymmetric, which requires using nonlinear models. We test this argument by considering trade flows of 28 relatively large industries that trade between the United States and Germany. Estimates of symmetric and linear models for each industry revealed that while 35 % of industries were affected by both policy uncertainty measures in the short run, the long-run effects of both measures were negligible. In contrast, estimates of asymmetric and nonlinear models revealed that 75 % of exports in either direction were affected by both policy uncertainty measures in the short run. In the long run, however, 29 % (10 %) of U.S. exports were affected by U.S. (German) policy uncertainty, and not much of German exports were affected by either uncertainty measure.

Keywords: Policy Uncertainty; U.S.-German Trade; 67 Industries; Asymmetric Analysis (search for similar items in EconPapers)
JEL-codes: F14 F19 F37 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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