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Trade in times of uncertainty
This paper studies 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. We find
that the sign and magnitude of the effect depend on whether uncertainty originates from the importing or exporting country.
Moreover, applying a cross-sectional gravity model, 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.
Forschungsbereich:Industrie-, Innovations- und internationale Ökonomie