Environmental consequences of trade-induced uncertainty: Evidence from econometric estimation

Abstract

Trade uncertainty reverberates through financial markets and leaves an indelible mark on environmental quality, compelling us to address the intricate interaction between trade policies and ecological sustainability. The priority purpose of our research is to analyze how trade uncertainty affects the environmental quality in the top ten polluted nations (Indonesia, Russia, Japan, Brazil, China, Germany, USA, France, India, and Mexico). While previous analyses have primarily trusted panel data procedures to assess the attachment between trade uncertainty and environmental quality, they have often failed to consider how this relationship varies across different countries. In contrast, the current study takes a novel approach by employing the 'Quantile-on-Quantile' method to evaluate this correlation separately for each country. This innovative method allows for a more accurate analysis, providing a comprehensive worldwide view and tailored insights for each nation. The results reveal a significant improvement in environmental quality resulting from trade uncertainty across different quantile intervals. Additionally, the findings of this study underscore the diversity in the connections between these factors among various nations. These outcomes underscore the need for policymakers to conduct comprehensive evaluations and implement effective strategies addressing trade uncertainty and environmental quality.