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Andras Komaromi

to overall activity in the domestic economy. Taken together, the evidence suggests that government lockdowns were important determinants for the supply of internationally traded goods, even if more of the local economic contraction can be explained by the fear-driven collapse of demand. In all, the notably consistent results in Table 3 speak to a sizable supply component in the evolution of trade during the first six months of the COVID-19 crisis as the lockdown decisions of suppliers seem to have had significant and economically meaningful spillovers on

Viral V. Acharya, Yang Liu, and Mr. Yunhui Zhao
We study the effect of COVID-19 containment measures on expected stock price volatility in some advanced economies, using event studies with hand-collected minute-level data and panel regressions with daily data. We find that six-month-ahead volatility indices dropped following announcements of initial or re-imposed lockdowns, and that they did not drop significantly following the easing of lockdowns. Such patterns are not as strong for three-month-ahead expected volatility and generally absent for one-month-ahead expected volatility. These results provide suggestive evidence for the existence of an intertemporal trade-off: although stringent containment measures cause short-term economic disruptions, they may reduce medium-term uncertainty (reflected in expected stock volatility) by boosting markets’ confidence that the outbreak would be under control more quickly.
Viral V. Acharya, Yang Liu, and Mr. Yunhui Zhao

views on Sweden’s initial “no-containment” strategy. In addition, the minute-level analysis can somewhat mitigate this endogeneity issue. 13 One may argue that the lower volatility may be simply a result of reduced policy uncertainty rather than of the lockdown decision: even if the government instead announced that there would not be any lockdown, the lower policy uncertainty would still lead to lower volatility. It is indeed hard (if not impossible) to empirically rule out this argument because the counterfactual scenario suggested in the comment is not

Andras Komaromi
World trade contracted dramatically during the global economic crisis induced by the COVID-19 pandemic. Disruptions in international supply chains were widely reported as governments imposed containment measures (lockdowns) to halt the spread of the disease. At the same time, demand declined as households and firms scaled back spending. This paper attempts to disentangle the supply and demand channels in trade by quantifying the causal effect of supply spillovers from lockdowns. We utilize a novel dataset of daily bilateral seaborne trade, and design a shift-share identification strategy that leverages geography-induced cargo delivery lags to track the transmission of supply disruptions across space. We find strong but short-lived supply spillovers of lockdowns through international trade. Moreover, the evidence is suggestive of the downstream propagation of countries’ lockdowns through global supply chains.
Cem Cakmakli, Selva Demiralp, Sebnem Kalemli-Ozcan, Sevcan Yesiltas, and Muhammed A. Yildirim

population, which, in turn, is mitigated by the lockdown decisions. The sooner the infection numbers decline, the sooner demand normalizes. Our open economy framework makes the role of global coordination clear. If the lockdown can be implemented with global synchronization, the pandemic will be controlled faster. As the number of infections decline globally, demand returns to pre-pandemic levels faster as both domestic and foreign demand normalize sooner. Thus, the economic costs of the pandemic can be kept at a minimum level. The last stage in Figure 1 combines

Cem Cakmakli, Selva Demiralp, Sebnem Kalemli-Ozcan, Sevcan Yesiltas, and Muhammed A. Yildirim
We quantify the macroeconomic effects of COVID-19 for a small open economy by calibrating a SIR-multi-sector-macro model. We measure sectoral supply shocks utilizing teleworking and physical job proximity, and demand shocks with credit card purchases. Both shocks are also affected from changing infection rates under different lockdown scenarios. Being an open economy amplifies the economic costs through two main channels. First, the demand shock has domestic and external components. Second, the initial shock is magnified due to domestic and international input-output linkages.