IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/9048.html

Policy Uncertainty, Trade, and Global Value Chains : Some Facts, Many Questions

Author

Listed:
  • Constantinescu,Ileana Cristina
  • Mattoo,Aaditya
  • Ruta,Michele

Abstract

This paper attempts to quantify the impact of economic policy uncertainty on overall trade and trade linked to global value chains. Using new data on policy uncertainty for 18 countries and 24 years, it finds a statistically significant negative impact of policy uncertainty on overall trade growth. A 1 percent increase in uncertainty is associated with a 0.02 percentage point reduction in the growth of goods and services trade, implying that the increase in policy uncertainty since mid-2018 may have caused a 1 percentage point decline in world trade growth. The paper also finds that the impact of policy uncertainty on trade linked to global value chains is similar to overall trade. This is likely to be the result of two opposing forces: global value chains are more dependent on relation-specific investments that are sensitive to policy uncertainty, but these investments also make trade patterns sticky. More research and better data are needed to disentangle these different effects empirically.

Suggested Citation

  • Constantinescu,Ileana Cristina & Mattoo,Aaditya & Ruta,Michele, 2019. "Policy Uncertainty, Trade, and Global Value Chains : Some Facts, Many Questions," Policy Research Working Paper Series 9048, The World Bank.
    • Handle: RePEc:wbk:wbrwps:9048
    as

    Download full text from publisher

    File URL: http://documents.worldbank.org/curated/en/507501572005904904/pdf/Policy-Uncertainty-Trade-and-Global-Value-Chains-Some-Facts-Many-Questions.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Efrem Castelnuovo, 2023. "Uncertainty before and during COVID‐19: A survey," Journal of Economic Surveys, Wiley Blackwell, vol. 37(3), pages 821-864, July.
    2. Christopher Findlay & Bernard Hoekman, 2021. "Value chain approaches to reducing policy spillovers on international business," Journal of International Business Policy, Palgrave Macmillan, vol. 4(3), pages 390-409, September.
    3. Yang, Zhihao & Hong, Junjie, 2021. "Trade policy uncertainty and energy intensity: Evidence from Chinese industrial firms," Energy Economics, Elsevier, vol. 103(C).
    4. Ketan REDDY & Subash SASIDHARAN & Shandre Mugan THANGAVELU, 2024. "Does Economic Policy Uncertainty Impact Firm GVC Participation? Microdata Evidence from India," Working Papers DP-2024-23, Economic Research Institute for ASEAN and East Asia (ERIA).
    5. Hammoudeh, Shawkat & Tiwari, Aviral Kumar & Abakah, Emmanuel Joel Aikins & Adeabah, David, 2023. "Global value chains in sub-Saharan Africa: The role of business regulations, policies and institutions," Emerging Markets Review, Elsevier, vol. 57(C).
    6. Geng Huang & Xi Lin & Shuying Xu & Junyu Wang & Ling‐Yun He, 2025. "Trade policy uncertainty, export destination, and firm's pollution emissions: Analysis from theoretical perspective," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(4), pages 2181-2189, June.
    7. Rodrigo Fagundes Cezar, 2022. "The Intricacies of Firms’ Support for Labor Provisions in US Trade Agreements," Global Policy, London School of Economics and Political Science, vol. 13(4), pages 483-494, September.
    8. Zhaohua Zhang & Roshini Brizmohun & Gang Li & Ping Wang, 2022. "Does economic policy uncertainty undermine stability of agricultural imports? Evidence from China," PLOS ONE, Public Library of Science, vol. 17(3), pages 1-17, March.
    9. Ayodele Folorunso Oshodi & Godwin Olasehinde-Williams, 2025. "US Trade Policy Uncertainty and Nigeria’s Participation in Global Value Chains: Evidence from Frequency Domain Causality, Wavelet Coherence Analysis, and Time-Varying Causality," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(1), pages 189-214, March.
    10. Zhou, Fengxiu & Wen, Huwei, 2022. "Trade policy uncertainty, development strategy, and export behavior: Evidence from listed industrial companies in China," Journal of Asian Economics, Elsevier, vol. 82(C).
    11. Randolph Luca Bruno & Maria Cipollina & Silvia Dal Bianco, 2023. "The Ripple Effect of Sanctions: Exploring the Impact on Global Value Chains Using a Gravity Model," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 9(3), pages 1063-1087, November.
    12. Ozili, Peterson Kitakogelu, 2021. "Economic policy uncertainty: are there regional and country correlation?," MPRA Paper 105636, University Library of Munich, Germany.
    13. Knobel, A. & Pyzhikov, N. & Aliev, T., 2020. "Trends in the development of world trade in recent decades and current challenges for its development," Journal of the New Economic Association, New Economic Association, vol. 45(1), pages 174-182.
    14. Glazatova, M. & Daniltsev, A., 2020. "Main trends in the development of world trade and structural features of Russian exports," Journal of the New Economic Association, New Economic Association, vol. 45(1), pages 183-192.
    15. Le Thanh Ha, 2025. "An investigation of a nexus between digital economy and society and climate risk: fresh insights from new estimation," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 14(1), pages 1-33, December.
    16. Patrizia Casadei & Simona Iammarino, 2021. "Trade policy shocks in the UK textile and apparel value chain: Firm perceptions of Brexit uncertainty," Journal of International Business Policy, Palgrave Macmillan, vol. 4(2), pages 262-285, June.
    17. Ruxu Zhang & Yahui Qu, 2022. "The Impact of U.S. Trade Policy Uncertainty on the Trade Margins of China’s Export to the U.S," Sustainability, MDPI, vol. 14(22), pages 1-16, November.

    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:9048. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.