The impacts of economic policy uncertainties on agriculture export

Abstract

The agricultural sector has experienced increased haphazard policy interventions and has been exposed to different policy uncertainties. However, relatively little empirical research has been done on how economic policy uncertainties (EPU) affect agricultural exports. Thus, this paper explores the effects of trade and economic policy uncertainties on agriculture exports. It also assesses trade agreements’ mediation function and logistics performance in the EPU-agricultural export relationship. The Poisson pseudo-maximum likelihood (PPML) method is employed to apply the structural gravity specification using data for 60 high-income and emerging economies from 2007-2018. The findings disclose that policy uncertainties adversely impact agricultural exports. The impacts of EPU remain qualitatively indistinguishable from those of a high-income or an emerging economy. However, emerging economies suffer more severe trade policy uncertainty impacts on agriculture exports than high-income countries. The results further prove that strong logistics and trade agreements mitigate policy uncertainty’s effect on agriculture exports. Besides, the results demonstrate that policy actions to improve EPU to the mean value of the sample result in a 2.6% reduction in tariff. Policymakers should take swift and decisive actions to reduce uncertainties and promote agriculture exports. Additionally, this study calls for improving trade agreements and logistics infrastructure to promote agricultural exports.

Keywords

• Agriculture export
• policy uncertainty
• structural gravity model
• Dr Chris Jones, Economics, Finance & Entrepreneurship, Aston University, Birmingham, United Kingdom of Great Britain and Northern Ireland
• Macroeconomics
• Microeconomics