Perceived macroeconomic uncertainty and export: evidence from cross-country data

The Perceived Macroeconomic Uncertainty (PMU) is seen as unpredictable volatility about the future economic development at aggregate level. While prior research explains how uncertainty (in general) influences international trade flows, research on the role of PMU in international trade flows is scarce. This article attempts to address this lack of understanding. Utilizing the gravity model and multicountry level data, our results show that: (1) the level of PMU in both importing countries and exporting countries has a significant negative impact on exports, but the effect of PMU of importing countries is larger than that of PMU of exporting countries; (2) PMU in importing countries has a trade diversion effect, suggesting that exporters are more willing to export to countries with relatively lower level of PMU; (3) the negative effects of PMU on trade have declined after the 2008 Great Financial Crisis, which may be related to the relative stability of the PMU index since the Great Financial Crisis and the increased concern of traders about other factors, such as trade policy uncertainty and Sino-US economic conflicts. Our research enriches prior findings that examine the effects of uncertainty on trade flows and carries important policy implications.