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

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  • Wu, Chao
  • Zhao, Ke
  • Liu, Jinquan

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.

Suggested Citation

  • Wu, Chao & Zhao, Ke & Liu, Jinquan, 2025. "Trade uncertainty and macroeconomic performance: An empirical analysis based on cross-country data," Economics Letters, Elsevier, vol. 250(C).
    • Handle: RePEc:eee:ecolet:v:250:y:2025:i:c:s0165176525001193
    DOI: 10.1016/j.econlet.2025.112282
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    References listed on IDEAS

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