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Asymmetry, Uncertainty and International Trade

Author

Listed:
  • Syed Hassan

    (School of Management, Swansea University)

  • Sarosh Shabi

    (School of Management, Swansea University)

  • Taufiq Choudhry

    (School of Business, University of Southampton)

Abstract

This paper studies the role of economic policy uncertainty on the US trade with Canada, China, Germany, Japan and the United Kingdom. This paper contributes to the literature by analysing the asymmetric impact of policy uncertainty on the US trade from December 1989 to December 2016. Results suggest that there is a negative relationship between the economic policy uncertainty and the US trade flows. Further, US trade responds more sensitively to rise in the uncertainty as compared to an equal negative shock, confirming the asymmetric hypothesis both in the short and 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 significant as well as due to uncertain profit margins, businesses can choose to delay long term investment projects and inventory levels resulting in a wide spread recessionary effect on the US business cycle.

Suggested Citation

  • Syed Hassan & Sarosh Shabi & Taufiq Choudhry, 2018. "Asymmetry, Uncertainty and International Trade," Working Papers 2018-24, Swansea University, School of Management.
    • Handle: RePEc:swn:wpaper:2018-24
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    File URL: https://rahwebdav.swan.ac.uk/repec/pdf/WP2018-24.pdf
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    References listed on IDEAS

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    Cited by:

    1. Al-Thaqeb, Saud Asaad & Algharabali, Barrak Ghanim, 2019. "Economic policy uncertainty: A literature review," The Journal of Economic Asymmetries, Elsevier, vol. 20(C).
    2. Bai, Xiwen, 2021. "Tanker freight rates and economic policy uncertainty: A wavelet-based copula approach," Energy, Elsevier, vol. 235(C).
    3. Mohsen Bahmani‐Oskooee & Ridha Nouira & Sami Saafi, 2023. "Whose policy uncertainty affects commodity trade between Australia and the United States?," Australian Economic Papers, Wiley Blackwell, vol. 62(1), pages 101-123, March.
    4. Adams, Samuel & Adedoyin, Festus & Olaniran, Eniola & Bekun, Festus Victor, 2020. "Energy consumption, economic policy uncertainty and carbon emissions; causality evidence from resource rich economies," Economic Analysis and Policy, Elsevier, vol. 68(C), pages 179-190.
    5. Mohsen Bahmani‐Oskooee & Ridha Nouira & Sami Saafi, 2023. "Whose policy uncertainty affects trade flows between Japan and the U.S.?," Australian Economic Papers, Wiley Blackwell, vol. 62(3), pages 457-485, September.

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    More about this item

    Keywords

    Economic policy uncertainty; international trade.;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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