Cross-country spillovers of trade uncertainty and their formation mechanisms

Abstract

This paper extends the study of uncertainty issues to the field of international trade, systematically identifies trade uncertainty in 15 representative countries using the DF-SV model, and deeply explores the cross-country spillover effects and their formation mechanisms of international trade uncertainty. Empirical results indicate that trade uncertainties and their cross-country spillover effects are sensitive to major economic and trade crisis events, during which there is a widespread transnational transmission of trade uncertainties, particularly among economic and trade partners. Developed countries are often net givers of trade uncertainty spillovers, while developing countries are net receivers. Further research finds that in countries with greater economic openness, exchange rate fluctuations, and trade uncertainty, the spillover effects of trade uncertainty tend to be stronger. Meanwhile, enhancing a country's financial openness, exchange rate stability, and the stability of foreign trade can effectively mitigate the trade uncertainty that a country receives. Our work has significant practical significance for understanding and resisting the impacts of trade uncertainties from other countries and promoting stable global economic development.