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The viral effects of foreign trade and supply networks in the euro area

Author

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  • Di Nino, Virginia
  • Veltri, Bruno
Abstract
Containment measures of COVID-19 have generated a chain of supply and demand shocks around the globe with heterogeneous fallout across industries and countries. We quantify their transmission via foreign trade with a focus on the euro area where deep firms integration within regional supply chains and strong demand linkages act as a magnification mechanism. We estimate that spillover effects in the euro area from suppression measures in one of the five main euro area countries range between 15-28% the size of the original shock; negative foreign demand shocks depress euro area aggregate activity by about a fifth the size of the external shock and a fourth of the total effect is due to indirect propagation through euro area supply chain. Last, reopening to regional tourism softened the contraction of aggregate activity due to travel and tourism bans by about a third in the euro area. Our findings suggest that enhanced coordination of recovery plans would magnify their beneficial effects.

Suggested Citation

  • Di Nino, Virginia & Veltri, Bruno, 2020. "The viral effects of foreign trade and supply networks in the euro area," IWH-CompNet Discussion Papers 4/2020, Halle Institute for Economic Research (IWH).
  • Handle: RePEc:zbw:iwhcom:42020
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    References listed on IDEAS

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    Cited by:

    1. Lodge, David & Pérez, Javier J. & Albrizio, Silvia & Everett, Mary & De Bandt, Olivier & Georgiadis, Georgios & Ca' Zorzi, Michele & Lastauskas, Povilas & Carluccio, Juan & Parrága, Susana & Carvalho,, 2021. "The implications of globalisation for the ECB monetary policy strategy," Occasional Paper Series 263, European Central Bank.
    2. Nenci, Silvia & Fusacchia, Ilaria & Giunta, Anna & Montalbano, Pierluigi & Pietrobelli, Carlo, 2022. "Mapping global value chain participation and positioning in agriculture and food: stylised facts, empirical evidence and critical issues," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 11(2), July.
    3. Inferrera, Sergio, 2021. "Globalisation in Europe: Consequences for the business environment and future patterns in light of Covid-19," IWH-CompNet Discussion Papers 2/2021, Halle Institute for Economic Research (IWH).
    4. Simola, Heli, 2021. "The impact of Covid-19 on global value chains," BOFIT Policy Briefs 2/2021, Bank of Finland Institute for Emerging Economies (BOFIT).

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    More about this item

    Keywords

    COVID-19; supply networks; GVCs; euro area foreign trade;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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