The Impacts of Economic Policy Uncertainty on Trade Flow

Dinkneh Gebre Borojo, Jiang Yushi and Miao Miao

Emerging Markets Finance and Trade, 2022, vol. 58, issue 8, 2258-2272

Abstract: This paper examines the impacts of economic policy uncertainty (EPU) on the trade flow of 143 countries, considering the EPU of exporter and importer countries and the income heterogeneity of the sample countries for over 2000–2019. Besides, it considered the mediating role of regional trade agreements (RTAs) in the EPU-trade nexus. Our results of the two-step Heckman sample selection model imply that the intensive and extensive margins of trade are adversely affected by the exporter and importer countries’ EPU. However, the negative effects of EPU of exporter countries on trade performance turn to positive when the mediating role of the RTAs is controlled. Also, the counterfactual simulation analysis is conducted to compute illustrative distance equivalents of improving the EPU to the average performing country in the sample. Finally, the marginal effect of EPU with respect to GDP per capita results indicates that the higher levels of per capita income seem to decrease the negative effect of EPU on trade. Our findings are robust after we run sensitivity analysis using the Poisson pseudo-maximum likelihood (PPML) to control heterogeneity and zero-valued observations issues. Finally, based on the findings, policy implications are forwarded.

Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://hdl.handle.net/10.1080/1540496X.2021.1971075 (text/html)
Access to full text is restricted to subscribers.

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:mes:emfitr:v:58:y:2022:i:8:p:2258-2272

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MREE20

DOI: 10.1080/1540496X.2021.1971075

Access Statistics for this article

More articles in Emerging Markets Finance and Trade from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().