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Trade in Times of Uncertainty

Author

Listed:
  • Anna Matzner
  • Birgit Meyer
  • Harald Oberhofer

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.

Suggested Citation

  • Anna Matzner & Birgit Meyer & Harald Oberhofer, 2023. "Trade in Times of Uncertainty," CESifo Working Paper Series 10284, CESifo.
    • Handle: RePEc:ces:ceswps:_10284
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    References listed on IDEAS

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    More about this item

    Keywords

    international trade; trade costs; gravity; uncertainty; counterfactual scenario; analysis; Brexit; Covid-19;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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