How Global Uncertainty Shapes Trade: Prof. Isaac Baley Unpacks His Research

Prof. Isaac Baley, Associate Professor of Economics at Universitat Pompeu Fabra, Associated Researcher at CREI, and Affiliated Professor at the Barcelona School of Economics, shares key insights from his research, Can Global Uncertainty Promote International Trade? Contrary to common belief, uncertainty can actually boost trade. In a general equilibrium trade model with information frictions, rising uncertainty increases both the mean and variance of export returns. Whether trade grows or shrinks depends on preferences, but under general conditions, higher uncertainty improves terms of trade, especially when consumption is most valuable. Trade also enhances risk-sharing, which is most effective when both parties lack information. Prof. Baley is also a Research Affiliate of Centre for Economic Policy Research. His research focuses on understanding decision-making in environments with microeconomic frictions (for example, information frictions, search frictions, irreversibilities, and adjustment costs) and its broader macroeconomic implications. His work explores diverse areas, including firms' pricing and investment strategies, monetary policy, international trade, and labor markets. He co-authored the book "The Data Economy" published this year by Princeton University Press and jointly written with Prof. Laura Veldkamp (who was featured in Business Talk, Episode 76). Before transitioning to academia, Prof. Baley served as an economic advisor to the Mexican Ministries of Economics and Finance, where he played a key role in developing policies aimed at improving access to financial markets. Prof. Isaac Baley earned his PhD in Economics from New York University and a Master’s in Economic Theory from The Autonomous Technological Institute of Mexico. This podcast is brought to you by Global Management Consultancy. For more information, please visit www.globalmanagementconsultancy.com. Disclaimer: A. The background music used in this video is the property of its respective developer and is protected by Copyright. Although it is a free version, Business Talk, Global Management Consultancy and Deepak Bhatt do not hold the rights to this music. B. Prof. Isaac Baley generously shared profound insights from his research, “Can Global Uncertainty Promote International Trade?”, during his appearance on the Business Talk podcast channel. The uploaded video contains copyrighted material; therefore, any modifications to graphics, music, or the presence of the author or host are strictly prohibited. All content is © 2025. All rights reserved.