Trade and Covid-19: Lessons from the first wave

January 19, 2021 Voxeu 0 Comments

The Covid-19 pandemic has inflicted both a supply and demand shock across many countries. Production, consumption, and trade patterns have been affected, both directly and as a result of the lockdowns and social distancing measures introduced to contain the virus. Factory closures have led to a drop in the supply of exportable goods in affected countries. These supply shocks have been compounded by demand shocks, as consumers and firms have had to modify their spending decisions in the new environment.

As the crisis unfolded, a recurrent question has been the relationship between Covid-19 and global value chains (GVCs), and particularly whether GVCs mitigate or magnify Covid-19 shocks (Baldwin and Tomiura 2020, Freund et al. 2020, Javorcik 2020, Miroudot 2020, Eppinger et al. 2020, Gerschel et al. 2020). In a recent paper (Espitia et al. 2021), we revisit this question using bilateral monthly export data for 28 exporting countries (most EU members, the US, and Japan) and multiple trading partners at a detailed sector level in the first six months of 2020. We find that participation in global value chains did increase exporters’ vulnerability to foreign shocks, but it also reduced vulnerability to domestic shocks. Read More.

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