Policy Uncertainty, Trade, and Global Value Chains : Some Facts, Many Questions
This paper attempts to quantify the impact of economic policy uncertainty on overall trade and trade linked to global value chains. Using new data on policy uncertainty for 18 countries and 24 years, it finds a statistically significant negative im...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/507501572005904904/Policy-Uncertainty-Trade-and-Global-Value-Chains-Some-Facts-Many-Questions http://hdl.handle.net/10986/32657 |
| Summary: | This paper attempts to quantify the
impact of economic policy uncertainty on overall trade and
trade linked to global value chains. Using new data on
policy uncertainty for 18 countries and 24 years, it finds a
statistically significant negative impact of policy
uncertainty on overall trade growth. A 1 percent increase in
uncertainty is associated with a 0.02 percentage point
reduction in the growth of goods and services trade,
implying that the increase in policy uncertainty since
mid-2018 may have caused a 1 percentage point decline in
world trade growth. The paper also finds that the impact of
policy uncertainty on trade linked to global value chains is
similar to overall trade. This is likely to be the result of
two opposing forces: global value chains are more dependent
on relation-specific investments that are sensitive to
policy uncertainty, but these investments also make trade
patterns sticky. More research and better data are needed to
disentangle these different effects empirically. |
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