WIFO Working Papers

Discussion papers by WIFO staff, consultants and guests – As of 2006 available online only – Free download

WIFO Working Papers are not peer reviewed and are not necessarily based on a coordinated position of WIFO. The authors were informed about the Guidelines for Good Scientific Practice of the Austrian Agency for Research Integrity (ÖAWI), in particular with regard to the documentation of all elements necessary for the replicability of the results.

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Anna Matzner, Birgit Meyer, Harald Oberhofer (WIFO)
Trade in Times of Uncertainty
WIFO Working Papers, 2023, (659), 38 pages
Online since: 08.03.2023 0:00
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 modelling 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.
JEL-Codes:F13, F14, F42, E60
Keywords:International Trade, Trade Costs, Gravity, Uncertainty, Counterfactual Scenario Analysis, Brexit, COVID-19
Research group:Industrial, Innovation and International Economics
Language:English