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© 2022 International Monetary Fund
WP/22/120
IMF Working Paper
Research Department
International Trade Spillovers from Domestic COVID-19 Lockdowns
Prepared by Shekhar Aiyar, Davide Malacrino, Adil Mohommad and Andrea Presbitero*
Authorized for distribution by Shekhar Aiyar
June 2022
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
ABSTRACT: While standard demand factors perform well in predicting historical trade patterns, they fail conspicuously in 2020, when pandemic-specific factors played a key role above and beyond demand. Prediction errors from a multilateral import demand model in 2020 vary systematically with the health preparedness of trade partners, suggesting that pandemic-response policies have international spillovers. Bilateral product-level data covering about 95 percent of global goods trade reveals 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, but their effect was shortlived, concentrated among goods produced in key global value chains, and mitigated by the availability of remote working and the size of the fiscal response to the pandemic.
| JEL Classification Numbers: | F14, F60, I18 |
| Keywords: | Trade, Spillover effects, Lockdowns, COVID-19 |
| Author’s E-Mail Address: | saiyar@imf.org, dmalacrino@imf.org, amohommad@imf.org, apresbitero@imf.org |
| JEL Classification Numbers: | F14, F60, I18 |
| Keywords: | Trade, Spillover effects, Lockdowns, COVID-19 |
| Author’s E-Mail Address: | saiyar@imf.org, dmalacrino@imf.org, amohommad@imf.org, apresbitero@imf.org |
Contents
List of Figures
1 Trade in the pandemic
2 Change in imports and partner countries’ lockdown stringency
3 Trade in the pandemic: Results from an import demand model
4 The international spillover effect of lockdowns over time
5 Quantifying the international spillover effect of lockdowns
6 The heterogeneous international spillover effect of lockdowns
7 Robustness: the international spillover effect of lockdowns dropping country groups
A1 Performance of the import demand model: 2019 vs 2020
A2 Performance of the import demand model: Mean square errors
A3 Representativeness of the TDM data
A4 The stringency index and workplace closings
A5 The international spillover effect of lockdowns over time, excluding China as an exporter
List of Tables
1 Import demand model: Summary statistics from the country-by-country estimates
2 Residual analysis: Pandemic-relevant variables
3 Residual analysis: Trade partners’ health preparedness
4 The international spillover effect of lockdowns
5 The international spillover effect of lockdowns across industry upstreamness
6 The international spillover effect of lockdowns: Workplace closings
A1 Import demand model: Panel estimates
A2 Residual analysis: Travel imports as a share of total service imports
A3 The international spillover effect of lockdowns: Alternative clustering