Original scientific paper
https://doi.org/10.1080/1331677X.2022.2081235
The impacts of trade policy uncertainty on trade flow of emerging economies and low-income developing countries
Dinkneh Gebre Borojo
Jiang Yushi
Miao Miao
Yang Liu
Abstract
This study is aimed to investigate the effects of the trade policy
uncertainty (T.P.U.) on the trade flow of 113 emerging economies
and low-income developing countries to 143 destination countries.
It further investigates the effects of T.P.U. based on income
heterogeneity. Moreover, it considers the effects of T.P.U. on trade
flow between developing countries’ pair and non-manufacture
trade. The two-step Heckman sample selection model is applied
to run the structural gravity model of trade using three-year intervals
for the period 2004–2019. The analysis is repeated using the
Poisson pseudo-maximum likelihood (P.P.M.L.) model for the
robustness test. The results imply that the extensive and intensive
margin of trade flow of emerging economies and low-income
developing countries are adversely affected by the T.P.U. of destination
countries. However, the T.P.U. of origin has an adverse
effect on the extensive margin of trade. It also negatively affects
the trade flow between developing-developing pairs. We also conduct
a counterfactual simulation analysis to convert the effect of
T.P.U. on trade flow to distance equivalent. To sum up, the findings
of this study imply that T.P.U. is a more important barrier to
trade for emerging economies and low-income developing countries.
Policy implications are forwarded based on the findings.
Keywords
Trade; trade policy uncertainty (T.P.U.); structural gravity model; emerging economies; lowincome developing countries
Hrčak ID:
303775
URI
Publication date:
31.3.2023.
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