Trade uncertainty and macroeconomic performance: An empirical analysis based on cross-country data

Chao Wu, Ke Zhao and Jinquan Liu

Economics Letters, 2025, vol. 250, issue C

Abstract: This paper uses import and export data from the top 15 countries by global trade volume and applies the DF-SV model to systematically identify the overall uncertainty level in their trade sectors. Based on this, a two-way fixed effect model and mediation effect model are employed to empirically examine whether and how trade uncertainty affects a country's macroeconomic performance. The results show that international trade uncertainty is "event-driven" and highly sensitive to major economic and trade crises. Trade uncertainty can lead to a decline in economic output and a rise in prices through channels such as financial frictions, foreign direct investment, and cross-border capital inflows, manifesting as a negative supply-side shock. Further heterogeneity analysis indicates that economic openness, financial openness, and a flexible exchange rate regime all help mitigate the negative impact of trade uncertainty.

Keywords: Trade uncertainty; Macroeconomic performance; Cross-country experience; Mechanism testing; Heterogeneity analysis (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176525001193
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:250:y:2025:i:c:s0165176525001193

DOI: 10.1016/j.econlet.2025.112282

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().