Trade Uncertainty Research Articles

Trade uncertainties and the hedging abilities of Bitcoin

AbstractIn this paper, we first estimate the monthly realised correlation, based on daily data, between stock returns of the United States (US) and Bitcoin returns. Then, we relate the realised correlation over the period October 2011 to May 2019 with a news‐based measure of the growth of trade uncertainty of the US. Our results show that the realised correlation is negatively impacted by increases in trade uncertainty, which continues to hold under alternative robustness checks, suggesting that Bitcoin can act as a hedge relative to the conventional stock market in the wake of heightened trade policy‐related uncertainties, and provide diversification benefits for investors.

The relationship between commodity prices and world trade uncertainty

This paper investigates the relationship between commodity prices and world trade uncertainty for the period of 1996Q1–2019Q3. World Trade Uncertainty Index (WTU), developed by Ahir et. al. (2018), and Commodity Price Index for the United States of America (USA) have been used in the analyses. For analyzing this relationship Continuous Wavelet Transform (CWT), Wavelet Coherency (WTC), and Wavelet Power Spectrum (WPS) techniques have been applied in the paper. Results indicate that there are strong noises for WTU between 2009–2010 and 2015–2016; for CPI between 2008–2009 and 2015–2016 and between 2008–2009 and 2017–2018 with a positively correlated and significant causal prediction.

Trade uncertainty, income, and democracy

Existing studies establish a strong correlation between income and democracy. Little, however, is known about whether income shocks driven by non-economic fundamentals matter for political transitions. This study employs trade uncertainty as a non-economic fundamental and examines the effect that trade uncertainty driven income variations have on democratic transitions over the period 1960–2013. We find that higher income fosters democratic transitions, but this effect works mainly for developing than developed countries. Specifically, using trade uncertainty as an instrument, we find that the Polity2 score, a measure of democracy, increases by at least 2.3 points following a 1 percentage point increase in GDP growth. This positive association is robust to exploiting conditional heteroskedasticity for identification, using different time periods, including lagged Polity2 as a regressor, and using alternative measures of GDP and democracy.

Import Competition and Worsening Labour Relations: Evidence from China's WTO Accession

I study the effect of Chinese import competition on unions in the United States, whose decline has mirrored that of manufacturing. I examine two channels through which unions might have been affected: 1) differences in the extent to which the China shock negatively impacted firms in unionized industries relative to firms in non-unionized industries and 2) the formation of new unions and dissolution of existing unions. I exploit the US’s granting of Permanent Normal Trade Relations (PNTR) status to China upon its entry into the WTO, which increased Chinese import exposure by removing significant amounts of trade policy uncertainty that varied across industries. I find evidence that firms in unionized industries reacted more negatively than firms in non-unionized industries, conditional on receiving the same trade uncertainty reduction shock. Interestingly, I do not find that there is a significant effect of the China shock on the incidence of union representation cases. I do find that the incidence of work stoppages initiated both by employers and workers increases, suggesting that both sides increase pressure on the other in a bid to increase bargaining power under the shadow of increased import exposure.

일방적 통상정책의 국제적 확산과 무역구조의 변화에 관한 연구 (A Study on Unilateral Trade Policy and International Trade Structure)

일방적 통상정책의 국제적 확산과 무역구조의 변화에 관한 연구 (A Study on Unilateral Trade Policy and International Trade Structure)

Trade Uncertainty and Firm Pollution: The Role of Emission Caps

How does a reduction in trade policy uncertainty affect firms' pollution behavior? Guided by a simple model, we show that the answer to this question depends on whether an emission cap exists. Reduced uncertainty leads to lower emissions per unit of output (emission intensity) when an emission cap exists and has no effect on emission intensity when one does not. We exploit spatial variations in reductions in export policy uncertainty caused by the U.S. conferral of PNTR to Chinese exporters and variations in the stringency of local SO2 emission controls in China to test the hypotheses. We find that the reduced uncertainty increases firm output by comparable magnitudes across the regions with different degrees of emission control, but they reduce firm SO2 emission intensity and firm total SO2 emissions only in regions with stringent emission control. The decline in SO2 emissions is caused by reduced use of fossil fuel and more abatement equipment. We also find that the reduction in uncertainty and emission control jointly improve firms' productivity, consistent with the Porter hypothesis.

Where You Export Matters: Measuring Uncertainty in Turkey's Export Markets

Using data from the World Uncertainty, World Trade Uncertainty, and World Pandemic Uncertainty indices for 142 countries, this paper introduces three new indicators for measuring uncertainty in Turkey's export markets from the first quarter of 1996 to the first quarter of 2020. The indicators measure uncertainty in Turkey's export destinations. After introducing three indicators of uncertainty for export markets, we investigate their effects on economic growth. We find that all uncertainty indicators are negatively related to economic performance. Specifically, an increase in uncertainty in export destinations leads to a slower growth rate of up to two quarters. Pandemic-induced uncertainty negatively affects economic growth only at the higher quantiles. We also discuss potential implications.

Economic Policy Uncertainty in the Euro Area: An Unsupervised Machine Learning Approach

We model economic policy uncertainty (EPU) in the four largest euro area countries by applying machine learning techniques to news articles. The unsupervised machine learning algorithm used makes it possible to retrieve the individual components of overall EPU endogenously for a wide range of languages. The uncertainty indices computed from January 2000 to May 2019 capture episodes of regulatory change, trade tensions and financial stress. In an evaluation exercise, we use a structural vector autoregression model to study the relationship between different sources of uncertainty and investment in machinery and equipment as a proxy for business investment. We document strong heterogeneity and asymmetries in the relationship between investment and uncertainty across and within countries. For example, while investment in France, Italy and Spain reacts strongly to political uncertainty shocks, in Germany investment is more sensitive to trade uncertainty shocks. JEL Classification: C80, D80, E22, E66, G18, G31

An Analysis of the Trend of China’s Export Trade to the USA Based on R Language

After President Trump came to power, in order to change the “imbalance” between China and US trade, he launched a trade war with China, which led to increase uncertainty in China-US trade and increased export volatility. Based on R language environment, this paper compares the advantages and disadvantages of seasonal ARIMA (p, d, q) model and double-index ETS (A, N, A) model in short-term forecast of China’s total export value to the United States. Then, the double-index ETS (A, N, A) model is selected to predict the trend of China’s export trade to the United States in the months of 2009-2020. The forecast results show that China’s export to the United States has seasonal characteristics. The export fluctuation is smaller than that in 2018, but the total value of exports has decreased significantly. Finally, some suggestions are put forward.

Indonesian Coffee in The Global Value Chain: The Comparison of Global Partnership Sustainability Standards Implementation

Global partnerships based on sustainability standards compiled by international NGOs are needed to achieve social, economic and environmentally sustainable development, as well as to deal with global uncertainty in trade and business of agricultural commodities, including coffee in Indonesia. This paper aims to compare the implementation of global partnership standards in coffee between Indonesia and other producer countries. The Study focused on sustainable standard-compliant in coffee such as 4C and Organic certification standards. Trade and sustainability map tools were described. The findings demonstrate that there were only 8 percent and 9 percent of the Indonesian coffee area certified by 4C and Organic, respectively. Indonesia placed at number fourth of 4C implementation in the worldwide after Brazil, Colombia, and Viet Nam. Indonesia is also placed at number fourth of Organic implementation in the worldwide after Mexico, Ethiopia, and Peru. To compete in the potential market, Indonesia’s commitment to implement sustainable standard-compliant in coffee is needed. Therefore, Indonesia has to increase the coverage of sustainability standards certified area to meet the global market demand. The government also should implement the right policies and programs to enhance the sustainability compliance of national coffee stakeholders.Keywords: coffee, global trade partnership, sustainability standards, global value chain

Jabil: Navigating through Supply Chain Uncertainty

In 2018, as the trade wars between the United States and China reached new heights, John faced challenges as he needed to quickly execute a plan to mitigate any risks to his company. The imposed tariffs were putting significant pressure on John’s current business initiatives, financial goals, and could derail is customers’ satisfaction. John knew that he was in safe hands with the support of Jabil’s supply chain and compliance directors. As one of the worlds largest Electronic Manufacturing Service companies, Jabil prides itself with understanding logistics, compliance, and operations competencies to support the growth of current and future business, all while mitigating and avoiding potential risks in the market. With the impact of the imposed tariffs beginning to affect John’s business, he knew that he needed to make a quick decision; either move operations out of China to a non-sanctioned country, continue the operations in China with the hope that the sanctions would end but risk customer satisfaction, or continue manufacturing the products in China and shipping the incomplete goods to another non-sanctioned location for final assembly, ultimately avoiding the tariff impacts. How was John expected to make this decision without understanding the trade uncertainties in the future? John knew that he needed to make his business profitable for him and the customer, but what approach did he need to execute on to keep the business sustainable? All these questions were impactful on the success of the business and could ultimately impact any long-term financial gains and growth with his customer base. John was anxious to come to a resolution, and knew that his next decisions would be critical to his business.

Uncertainty, risk, and trust in nineteenth-century East African longdistance trade

Uncertainty, risk, and trust in nineteenth-century East African longdistance trade

Uncertainty and Exchange Rate Volatility: The Case of Mexico

This paper investigates the effect of domestic and global uncertainty on the volatility of the Mexican peso US dollar exchange rate during the period January 1999 - July 2018. The analysis is performed in two stages. In the first stage, we derive an exchange rate volatility measure by estimating a univariate GARCH(1,1) model. In the second stage, we regress the estimated exchange rate volatility on domestic and global uncertainty proxies, built with data from the survey of professional forecasters conducted monthly by Banco de Mexico since 1999. In order to capture the expectations of a broad set of economic agents, we also include as regressors both the Chicago Board Options Exchange Volatility Index (VIX) and Baker, Bloom and Davis global economic policy uncertainty index (EPU). A trade uncertainty index based on Google trends is incorporated in the model to analyze if uncertainty regarding NAFTA and Mexico’s trade liberalization policies has had an impact on the exchange rate volatility. The price of a barrel of Mexican oil mix is also included since the price volatility of this commodity has been shown to affect the peso US dollar exchange rate volatility. In order to control for the surprise component of macroeconomic data announcements the analysis controls for an inflation surprise and a GDP surprise. Finally, we assess whether the effect of domestic political uncertainty and domestic economic uncertainty on exchange rate volatility is amplified in election and recession periods. The main results show that the domestic political uncertainty measure, the VIX and the global EPU indices are the main drivers of the exchange rate volatility. We also find that in recession periods, higher domestic economic uncertainty is associated with higher exchange rate volatility. These findings are robust to alternative exchange rate volatility proxies and econometric techniques.

Corporate life and death: who succumbs, who survives during disruption?

PurposeThis paper provides a disruption survival guide for companies during times of macro transformation.Design/methodology/approachThe research compared the S&P 500 – as proxy for the US economy – from 1996 and 2018. Of companies no longer on the list, 12 died, including two from manufacturing: Bethlehem Steel and Outboard Marine Corporation (OMC). Still, some US manufacturers survived or even thrived during the period. To understand why, the paper compares Bethlehem, which died in 2003, to US Steel, which has survived but was removed from the S&P 500 list in 2014, and to Nucor, which has stayed on the list. POSCO is also used for comparison. The OMC case adds a different industry perspective.FindingsThe main findings from these cases are as follows: stay fit financially and avoid overreaching in good times, use operation strategies such as Lean and Six Sigma to build a culture of continual innovation and stay close to customers to compete on the basis of differentiation, particularly if competing on price is not a realistic option. The good news is differentiation is possible even in seemingly commoditized sectors like steel.Research limitations/implicationsThis paper contributes to the literature on differentiation as a strategy for competing with low-cost disruptors.Practical implicationsThis paper provides insights into the use of Lean, Six Sigma and other strategies for creating a culture of continual innovation among employees, customers, suppliers and other strategic partners. And, building on this culture, to compete on the basis of value-added differentiation, particularly if competing on price is not a realistic option.Originality/valueThe paper cuts through complex, fast-changing, transformative macro issues – e.g., Chinese competition and trade uncertainties related to new tariffs – and provides practical, timeless insights for navigating in such times. The focus here is on strategies for competing on the basis of value-added differentiation, particularly if competing on price is not a viable option. The good news is such competition is possible even in seemingly commoditized sectors like steel.

Quality uncertainty and intermediation in international trade

Uncertainty about product quality is endemic in international trade. We develop a dynamic, two-country model, where home producers differ in terms of the quality of their products. Quality is not fully observed by foreign consumers initially but known once the product is consumed. We show that this lack of information generates an information cost of exporting, over and above the usual fixed costs used in standard heterogeneous firm models. We use the model to examine the role played by intermediaries in alleviating quality uncertainty. In the process, we uncover a positive externality of using intermediaries. The model generates a novel prediction about price dynamics that finds support in the data.

Trade Uncertainty and Investment in the Euro Area

We analyze the impact of trade policy uncertainty on investment in the euro area. Our identification strategy assumes that countries that are relatively more dependent on global trade networks exhibit a higher sensitivity of investment with respect to trade uncertainty. We find that the investment-to-GDP ratio is on average 0.8 percentage points lower for five quarters following a one standard deviation increase in the level of trade uncertainty. We demonstrate that these results are unlikely to be driven by omitted variables and that they are robust to different measures of trade uncertainty and trade openness. Our analysis suggests that the detrimental effect of trade tensions goes beyond lower trade growth, as uncertainty can reduce investment and the economy’s long-term growth potential.

Trade Uncertainty and Investment in the Euro Area

We analyze the impact of trade policy uncertainty on investment in the euro area. Our identification strategy assumes that countries that are relatively more dependent on global trade networks exhibit a higher sensitivity of investment with respect to trade uncertainty. We find that the investment-to-GDP ratio is on average 0.8 percentage points lower for five quarters following a one standard deviation increase in the level of trade uncertainty. We demonstrate that these results are unlikely to be driven by omitted variables and that they are robust to different measures of trade uncertainty and trade openness. Our analysis suggests that the detrimental effect of trade tensions goes beyond lower trade growth, as uncertainty can reduce investment and the economy’s long-term growth potential.

Retreat from Harmonization: Trade Uncertainties Arising from Divergent Maximum Residue Limits for Pesticides

Maximum Residue Limits (MRL) for pesticides are used in the regulation of imports of agri-food products. Pesticide use is essentially universal in conventional agricultural production globally. The Codex establishes MRLs for various pesticides. In the 1990s there was de facto harmonization of MRLs based on Codex or, absent an international standard, importer acceptance of the exporter’s MRL. Since that time many countries have been establishing nationally based MRLs, leading to asynchronous regulations that act as trade barriers. This trend is particularly disturbing given the important role international trade in agri-food products is expected to play in meeting the food security challenges associated with feeding a global population predicted to reach 9 billion by 2050. This article explores the reasons for the increasing divergence in MRLs and its trade impacts, outlines the food security concerns arising from this increasing non-tariff barrier and examines multilateral, regional and national efforts to foster MRL harmonization and counter the trend to nationally based MRLs.

Austerity, luxury and uncertainty in the Indian emerald trade

This article examines the bodily practices of austerity in a Jain community that dominates a large portion of the international emerald trade. The material characteristics of emeralds make them refractory towards formal markets. These gemstones are impossible to value with consistency. Prices fluctuate wildly as the stones move from hand to hand and from continent to continent. Among the Jains, bonds forged by kinship and religious observance guarantee international, multi-million dollar contracts in the absence of any legal enforcement mechanism. Religious ethics ensure that people deal with each other in good faith and make good on their debts. These ethics are inculcated in part through bodily practices. The bodily practices of Jain traders also include jewelers’ sensual relationships with the stones themselves. The pursuit of salvation through austerity and the pursuit of profit through luxury are conjoined in a community dedicated to making sense of the inscrutable mineral characteristics of emeralds.

PROBLEMS EFFECTIVE FUNCTIONING OF THE SHIPPING COMPANIES

The operation of shipping companies in today's rapidly changing conditions is associated with a number of complications due to the dependence of operating activities on many external factors. Recent developments and trends in world trade, characterized by uncertainty, a decline in the rate of growth in trade to rates below the growth of the economy as a whole, which requires a revision of the globalization model of development. Such changes can bring both positive effects and uncertainty in trade and shipping, mainly due to global shifts in the structure of transportation, production and consumption, which may reduce the demand for maritime transport services and the volume of sea transport. Recent trends in the shipping industry have weak growth rates, continuing problems of excess tonnage, imbalance between supply and demand. The article questions of compliance pace and marine transportation trends of the global economy and the need for traffic examines external factors, which have a direct or indirect effect on the development of the freight market: partnership in the field of infrastructure quality, changes in trade policy and liberalization, population growth and urbanization, growing cross-border e-commerce trade, circular economy, reduction of global use of fossil fuels. It is determined which of the factors will increase the volume of transportation and conversely, and that are able to change the structure of the world fleet. It is proposed to move on to new methods of forecasting sea trade flows, different from extrapolation of GDP and growth of trade turnover, including fiscal and environmental policies, as well as transport costs and regulatory aspects.