John Lewis

Covid travel restrictions limited movement of people but also made cross-border goods trade more difficult.  Did this contribute to the fall in global goods trade during the pandemic, and if so by how much? In a recent paper using a structural gravity model on global trade flows with domestic trade, I show that a full closure reduced trade for a typical country pair by around 19%, implying a peak hit to global trade of about 23% in 2020 Q2. Hits were larger for nearby partners, and were concentrated in road and air freight, with seaborne trade unaffected. These differences explain why some countries could close borders with smaller trade hits than others. Trade rebounded as restrictions eased, suggesting no lasting scarring.

Continue reading “When travel restrictions became trade frictions: evidence from Covid-era border closures” →