Arbeitspapier

Trade in times of uncertainty

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.

Language
Englisch

Bibliographic citation
Series: WIFO Working Papers ; No. 659

Classification
Wirtschaft
Trade Policy; International Trade Organizations
Empirical Studies of Trade
International Policy Coordination and Transmission
Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General
Subject
International Trade
Trade Costs
Gravity
Uncertainty
Counterfactual Scenario Analysis
Brexit
COVID-19

Event
Geistige Schöpfung
(who)
Matzner, Anna
Meyer, Birgit
Oberhofer, Harald
Event
Veröffentlichung
(who)
Austrian Institute of Economic Research (WIFO)
(where)
Vienna
(when)
2023

Handle
Last update
10.03.2025, 11:42 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Matzner, Anna
  • Meyer, Birgit
  • Oberhofer, Harald
  • Austrian Institute of Economic Research (WIFO)

Time of origin

  • 2023

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