The University of Southampton
University of Southampton Institutional Repository

Trade and Economic Policy Uncertainty

Trade and Economic Policy Uncertainty
Trade and Economic Policy Uncertainty
This paper studies the role of economic policy uncertainty (EPU) on US trade. It contributes to the literature by analyzing the asymmetric impact of policy uncertainty on the US trade with Canada, China, Germany, Japan and the United Kingdom from December 1989 to December 2017. Results suggest that there is a negative relationship between the EPU and the US trade flows. Further, US trade responds more sensitively to a rise in uncertainty compared to an equal negative shock, confirming the asymmetric hypothesis both in the short run and the long run. Comparing the respective uncertainty indices, US EPU has a significantly greater impact on the trade relative to the EPU of its trading partners. These findings have both demand and supply side implications – i.e. increase in the economic policy uncertainty can reduce the aggregate consumption significantly. Also, due to uncertain profit margins, businesses can choose to delay long-term investment projects and inventory levels resulting in a widespread recessionary effect on the US business cycle.
Dryad Digital Repository
Hassan, Syed S.
fc2f6b35-be21-47c9-9efc-2fa57e0b071f
Shabi, Sarosh
7bc53ee7-3452-4852-ac43-94e436314031
Choudhry, Taufiq
6fc3ceb8-8103-4017-b3b5-2d38efa57728
Hassan, Syed S.
fc2f6b35-be21-47c9-9efc-2fa57e0b071f
Shabi, Sarosh
7bc53ee7-3452-4852-ac43-94e436314031
Choudhry, Taufiq
6fc3ceb8-8103-4017-b3b5-2d38efa57728

(2020) Trade and Economic Policy Uncertainty. Dryad Digital Repository doi:10.5061/dryad.zs7h44j5r [Dataset]

Record type: Dataset

Abstract

This paper studies the role of economic policy uncertainty (EPU) on US trade. It contributes to the literature by analyzing the asymmetric impact of policy uncertainty on the US trade with Canada, China, Germany, Japan and the United Kingdom from December 1989 to December 2017. Results suggest that there is a negative relationship between the EPU and the US trade flows. Further, US trade responds more sensitively to a rise in uncertainty compared to an equal negative shock, confirming the asymmetric hypothesis both in the short run and the long run. Comparing the respective uncertainty indices, US EPU has a significantly greater impact on the trade relative to the EPU of its trading partners. These findings have both demand and supply side implications – i.e. increase in the economic policy uncertainty can reduce the aggregate consumption significantly. Also, due to uncertain profit margins, businesses can choose to delay long-term investment projects and inventory levels resulting in a widespread recessionary effect on the US business cycle.

This record has no associated files available for download.

More information

Published date: 1 January 2020

Identifiers

Local EPrints ID: 448457
URI: http://eprints.soton.ac.uk/id/eprint/448457
PURE UUID: 8cb8a774-83ef-4676-9765-804949d56638
ORCID for Taufiq Choudhry: ORCID iD orcid.org/0000-0002-0463-0662

Catalogue record

Date deposited: 22 Apr 2021 16:47
Last modified: 15 Dec 2021 02:36

Export record

Altmetrics

Contributors

Contributor: Syed S. Hassan
Contributor: Sarosh Shabi
Contributor: Taufiq Choudhry ORCID iD

Download statistics

Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.

View more statistics

Atom RSS 1.0 RSS 2.0

Contact ePrints Soton: eprints@soton.ac.uk

ePrints Soton supports OAI 2.0 with a base URL of http://eprints.soton.ac.uk/cgi/oai2

This repository has been built using EPrints software, developed at the University of Southampton, but available to everyone to use.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we will assume that you are happy to receive cookies on the University of Southampton website.

×