Economic Policy Uncertainty and Manufacturing Value-added Exports

This study explores the effects of increased economic policy uncertainty (EPU) in both importing and exporting countries on manufacturing value-added exports. The results show that increased EPU of both importing and exporting countries would result in decreases in manufacturing value-added trade flows, and the negative effect of exporters' EPU is larger than that of importers' EPU. Our results also provide evidence on the influence channels: increased EPU of exporting countries affects manufacturing value-added trade flows primarily through the cost to export, while increased EPU of importing countries primarily through market demand. This conclusion is robust to a series of robustness checks.