22nd February 2023
Research seminar by JAANIKA MERIKÜLL
(Eesti Pank, University of Tartu)
Authors: Konstantins Benkovskis, Jaanika Meriküll, Aurelija Proškute
This paper uncovers the effect of Covid-related restrictions on imports and exports of firms and disentangles their adjustment margins. We use foreign trade data at the firm-partner level from Lithuania, Latvia and Estonia providing comparative evidence from three relatively similar small open economies. The analysis is conducted at the monthly frequency from January 2019 to December 2020 focusing on the first waves of pandemics and on production-related restrictions of workplace closing. The upstream and downstream restrictions are studied, and the effects are decomposed into extensive vs intensive margin and into prices vs quantities. We find, first, that the COVID-related restrictions in a partner country affect imports and exports, while the effect on exports is more pronounced. This suggests that downstream restrictions had stronger effect on trade than upstream restrictions during the pandemics. Second, we find that in terms of markets/products vs values the main adjustment margin is value. Adjustment to restrictions take place mostly by smaller amounts traded than by markets or product not traded. Third, we observe that in terms of prices vs quantities the main adjustment margin is quantity.