We examine the interaction of economic and policy uncertainty in a dynamic, heterogeneous firms model. Uncertainty about foreign income, trade protection, and their interaction dampens export investment. Trade agreements can mitigate uncertainty and the probability of policy uncertainty shocks. We use firm data from 2003–2011 to establish new facts about U.S. export dynamics. These facts include a differentially lower export growth to non-preferential markets driven by the extensive margin at the start of the Great Trade Collapse.
Economic and policy uncertainty: Aggregate export dynamics and the value of agreementsJeronimo Carballo, Kyle Handley, and Nuno Limao , ( 139 )
Journal of International Economics