necessary control variables. This formulation includes higher order indirect exposures (e.g. L E U S , t k , for k = 2, … , K ) that would capture long supply-chain links.
We make three assumptions to take this model to the data.
First, we take K = 2. That is, we only go one step further than our baseline results and assume away any effect of lockdownsthree and more steps away from the importing country. Given the short-lived nature of direct lockdown effects, especially in relation to global delivery lags involved in seaborne trade, our prior was that