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. 2022 Feb;45(2):445-467.
doi: 10.1111/twec.13063. Epub 2020 Dec 8.

Simulating the trade effects of the COVID-19 pandemic: Scenario analysis based on quantitative trade modelling

Eddy Bekkers  1 , Robert B Koopman  1
Affiliations

Simulating the trade effects of the COVID-19 pandemic: Scenario analysis based on quantitative trade modelling

Eddy Bekkers et al. World Econ. 2022 Feb.

Abstract

The WTO Global Trade Model, a quantitative trade model, is employed to project the impact on the global economy of the COVID-19 pandemic. Because of the profound uncertainty about the duration of the pandemic and the containment measures, three scenarios are constructed, V-shaped, U-shaped and L-shaped recovery, corresponding with a duration of the pandemic of 3 months, 6 months and more than a year. The pandemic and containment measures are assumed to lead to a general reduction of labour supply, a rise in trade costs, and reductions in both demand and supply in sectors most affected by the containment measures. GDP and trade are projected to fall by, respectively, 5% and 11% in the V-shaped and L-shaped scenarios and trade by, respectively, 8% and 20%. The response of trade to the reduction in GDP, measured by the trade-to-GDP elasticity, is projected to rise as the crisis lasts longer. The reason is that a longer duration will lead to a larger drop in spending on durables which are highly tradable.

Keywords: COVID‐19; quantitative trade models; scenario analysis.

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References

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