International Trade Spillovers from Domestic COVID-19 Lockdowns
IMF Working Papers, June 17, 2022
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Bibliographic details
- Authors: Shekhar Aiyar, Davide Malacrino, Adil Mohommad, Andrea F Presbitero
- Published: June 17, 2022
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400212178.001
Key findings from analysis
- Standard demand factors predict historical trade patterns well but fail conspicuously in 2020, when pandemic-specific factors mattered above and beyond demand.
- Prediction errors from a multilateral import demand model in 2020 vary systematically with the health preparedness of trade partners, indicating that pandemic-response policies generate international spillovers.
- Bilateral product-level data covering about 95 percent of global goods trade reveal sizable negative international spillovers to trade from supply disruptions due to domestic lockdowns.
- These international spillovers accounted for up to 60 percent of the observed decline in trade in the early phase of the pandemic.
- The negative spillover effect was shortlived.
- The spillovers were concentrated among goods produced in key global value chains.
- The adverse international spillovers were mitigated by:
- the availability of remote working, and
- the size of the fiscal response to the pandemic.
Analytical approach and scope
- Uses a multilateral import demand model to generate prediction errors for 2020 and assess deviations from expected trade patterns.
- Employs bilateral product-level trade data covering about 95 percent of global goods trade to quantify supply-disruption spillovers.
- Focuses on the early phase of the COVID-19 pandemic when observed trade declines were largest.
Policy-relevant implications
- Pandemic-response policies have meaningful cross-border externalities that can substantially amplify global trade declines.
- Strengthening health preparedness in trade partners can reduce adverse international trade spillovers.
- Policies supporting remote working capabilities can mitigate supply-disruption spillovers.
- Larger fiscal responses can cushion the international trade impact of domestic lockdowns.
- Targeting resilience in key global value chain nodes is important to limit concentrated spillovers.
International Trade Spillovers from Domestic COVID-19 Lockdowns — IMF Working Paper by Shekhar Aiyar, Davide Malacrino, Adil Mohommad, and Andrea F Presbitero (June 17, 2022).
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