IDEAS home Printed from https://ideas.repec.org/p/mar/magkse/202215.html
   My bibliography  Save this paper

Lockdown Spillovers

Author

Listed:
  • Hongyi Chen

    (Hong Kong Institute for Monetary and Financial Research)

  • Peter Tillmann

    (University of Giessen)

Abstract

Lockdowns imposed to fight the Covid-19 pandemic have cross-border effects. In this paper, we estimate the empirical magnitude of lockdown spillovers in a set of panel local projections. We use daily indicators of economic activity such as stock returns, effective exchange rates, NO2 emissions, mobility and maritime container trade. Lockdown shocks originating in the most important trading partners have a strong and significant adverse effect on economic activity in the home economy. For stock prices and exports, the spillovers can even be larger than the effect of domestic lockdown shocks. The results are robust with respect to alternative country weights used to construct foreign shocks, i.e. weights based on foreign direct investment or the connectedness through value chains. We find that lockdown spillovers have been particularly strong during the first wave of the pandemic. Countries with a higher export share are particularly exposed to lockdown spillovers.

Suggested Citation

  • Hongyi Chen & Peter Tillmann, 2022. "Lockdown Spillovers," MAGKS Papers on Economics 202215, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:202215
    as

    Download full text from publisher

    File URL: https://www.uni-marburg.de/en/fb02/research-groups/economics/macroeconomics/research/magks-joint-discussion-papers-in-economics/papers/2022-papers/15-2022_chen.pdf
    File Function: First 202215
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Vasco M Carvalho & Makoto Nirei & Yukiko U Saito & Alireza Tahbaz-Salehi, 2021. "Supply Chain Disruptions: Evidence from the Great East Japan Earthquake," The Quarterly Journal of Economics, Oxford University Press, vol. 136(2), pages 1255-1321.
    2. Thomas Hale & Noam Angrist & Rafael Goldszmidt & Beatriz Kira & Anna Petherick & Toby Phillips & Samuel Webster & Emily Cameron-Blake & Laura Hallas & Saptarshi Majumdar & Helen Tatlow, 2021. "A global panel database of pandemic policies (Oxford COVID-19 Government Response Tracker)," Nature Human Behaviour, Nature, vol. 5(4), pages 529-538, April.
    3. Rebecca Freeman & Richard Baldwin, 2022. "Risks and Global Supply Chains: What We Know and What We Need to Know," Annual Review of Economics, Annual Reviews, vol. 14(1), pages 153-180, August.
    4. Rebucci, Alessandro & Elenev, Vadim & , & Simeonova, Emilia, 2021. "Direct and Spillover Effects from Staggered Adoption of Health Policies: Evidence from Covid-19 Stay-at-Home Orders," CEPR Discussion Papers 16649, C.E.P.R. Discussion Papers.
    5. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
    6. Bonadio, Barthélémy & Huo, Zhen & Levchenko, Andrei A. & Pandalai-Nayar, Nitya, 2021. "Global supply chains in the pandemic," Journal of International Economics, Elsevier, vol. 133(C).
    7. Cacciatore, Matteo & Duval, Romain & Furceri, Davide & Zdzienicka, Aleksandra, 2021. "Fiscal multipliers and job-protection regulation," European Economic Review, Elsevier, vol. 132(C).
    8. Eduardo Levy Yeyati & Patricio Goldstein & Luca Sartorio, 2021. "Lockdown Fatigue: The Diminishing Effects of Quarantines on the Spread of COVID-19," CID Working Papers 391, Center for International Development at Harvard University.
    9. John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
    10. Diego A. Cerdeiro & Andras Komaromi, 2022. "Supply spillovers during the pandemic: Evidence from high‐frequency shipping data," The World Economy, Wiley Blackwell, vol. 45(11), pages 3451-3474, November.
    11. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
    12. Kuester, Keith & Corsetti, Giancarlo & Müller, Gernot & Schmidt, Sebastian, 2021. "The Exchange Rate Insulation Puzzle," CEPR Discussion Papers 15689, C.E.P.R. Discussion Papers.
    13. Patricio Goldstein & Eduardo Levy Yeyati & Luca Sartorio, 2021. "Lockdown fatigue: The diminishing effects of quarantines on the spread of COVID-19," Department of Economics Working Papers wp_gob_2021_01, Universidad Torcuato Di Tella.
    14. Souknilanh Keola & Kazunobu Hayakawa, 2021. "Do Lockdown Policies Reduce Economic and Social Activities? Evidence from NO2 Emissions," The Developing Economies, Institute of Developing Economies, vol. 59(2), pages 178-205, June.
    15. Stefan Goldbach & Volker Nitsch, 2022. "Covid-19 and Capital Flows: The Responses of Investors to the Responses of Governments," Open Economies Review, Springer, vol. 33(4), pages 751-774, September.
    16. Dabo Guan & Daoping Wang & Stephane Hallegatte & Steven J. Davis & Jingwen Huo & Shuping Li & Yangchun Bai & Tianyang Lei & Qianyu Xue & D’Maris Coffman & Danyang Cheng & Peipei Chen & Xi Liang & Bing, 2020. "Global supply-chain effects of COVID-19 control measures," Nature Human Behaviour, Nature, vol. 4(6), pages 577-587, June.
    17. Mikkel Plagborg‐Møller & Christian K. Wolf, 2021. "Local Projections and VARs Estimate the Same Impulse Responses," Econometrica, Econometric Society, vol. 89(2), pages 955-980, March.
    18. Mr. Diego A. Cerdeiro & Andras Komaromi & Yang Liu & Mamoon Saeed, 2020. "World Seaborne Trade in Real Time: A Proof of Concept for Building AIS-based Nowcasts from Scratch," IMF Working Papers 2020/057, International Monetary Fund.
    19. Goolsbee, Austan & Syverson, Chad, 2021. "Fear, lockdown, and diversion: Comparing drivers of pandemic economic decline 2020," Journal of Public Economics, Elsevier, vol. 193(C).
    20. Kazunobu Hayakawa & Hiroshi Mukunoki, 2021. "Impacts of Lockdown Policies on International Trade," Asian Economic Papers, MIT Press, vol. 20(2), pages 123-141, Summer.
    21. Philipp Engler & Nathalie Pouokam & Diego Rodriguez Guzman & Mrs. Irina Yakadina, 2020. "The Great Lockdown: International Risk Sharing Through Trade and Policy Coordination," IMF Working Papers 2020/242, International Monetary Fund.
    22. Jasper Verschuur & Elco E Koks & Jim W Hall, 2021. "Global economic impacts of COVID-19 lockdown measures stand out in high-frequency shipping data," PLOS ONE, Public Library of Science, vol. 16(4), pages 1-16, April.
    23. Pol Antràs & Davin Chor, 2021. "Global Value Chains," NBER Working Papers 28549, National Bureau of Economic Research, Inc.
    24. Lutz Kilian & Yun Jung Kim, 2011. "How Reliable Are Local Projection Estimators of Impulse Responses?," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1460-1466, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Klose, Jens & Tillmann, Peter, 2023. "Stock market response to Covid-19, containment measures and stabilization policies—The case of Europe," International Economics, Elsevier, vol. 173(C), pages 29-44.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chen, Hongyi & Tillmann, Peter, 2023. "Lockdown spillovers," Journal of International Money and Finance, Elsevier, vol. 137(C).
    2. Goodhart, Charles, 2022. "Ben S. Bernanke: 21st century monetary policy: the federal reserve from the great inflation to COVID-19. W.W. Norton & Company, 2022," LSE Research Online Documents on Economics 115779, London School of Economics and Political Science, LSE Library.
    3. Francesco Paolo Conteduca & Alessandro Borin, 2022. "A New Dataset for Local and National COVID-19-Related Restrictions in Italy," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 8(2), pages 435-470, July.
    4. Metiu, Norbert, 2021. "Anticipation effects of protectionist U.S. trade policies," Journal of International Economics, Elsevier, vol. 133(C).
    5. Byrne, Shane & Devine, Kenneth & King, Michael & McCarthy, Yvonne & Palmer, Christopher, 2023. "The Last Mile of Monetary Policy: Inattention, Reminders, and the Refinancing Channel," Research Technical Papers 6/RT/23, Central Bank of Ireland.
    6. Fraiberger, Samuel P. & Lee, Do & Puy, Damien & Ranciere, Romain, 2021. "Media sentiment and international asset prices," Journal of International Economics, Elsevier, vol. 133(C).
    7. Auld, M. Christopher & Toxvaerd, Flavio, 2021. "The Great Covid-19 Vaccine Rollout: Behavioural And Policy Responses," National Institute Economic Review, National Institute of Economic and Social Research, vol. 257, pages 14-35, August.
    8. Ma, Chang & Rogers, John H. & Zhou, Sili, 2020. "Modern pandemics: Recession and recovery," BOFIT Discussion Papers 16/2020, Bank of Finland Institute for Emerging Economies (BOFIT).
    9. Daniel Goller & Stefan C. Wolter, 2021. "“Too shocked to search” The COVID-19 shutdowns’ impact on the search for apprenticeships," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 157(1), pages 1-15, December.
    10. Kuester, Keith & Corsetti, Giancarlo & Müller, Gernot & Schmidt, Sebastian, 2021. "The Exchange Rate Insulation Puzzle," CEPR Discussion Papers 15689, C.E.P.R. Discussion Papers.
    11. Jean-Charles Bricongne & Juan Carluccio & Lionel Gérard Fontagné & Guillaume Gaulier & Sebastian Stumpner, 2022. "From Macro to Micro: Large Exporters Coping with Common Shocks," CESifo Working Paper Series 9857, CESifo.
    12. Ambrocio, Gene, 2020. "Inflationary household uncertainty shocks," Bank of Finland Research Discussion Papers 5/2020, Bank of Finland.
    13. Klose, Jens & Tillmann, Peter, 2022. "The Real and Financial Impact of COVID-19 Around the World," VfS Annual Conference 2022 (Basel): Big Data in Economics 264030, Verein für Socialpolitik / German Economic Association.
    14. Clancy, Daragh & Valenta, Vilém & Smith, Donal, 2023. "The macroeconomic effects of global supply chain reorientation," Research Technical Papers 5/RT/23, Central Bank of Ireland.
    15. Cajal-Grossi, Julia & Del Prete, Davide & Macchiavello, Rocco, 2023. "Supply chain disruptions and sourcing strategies," International Journal of Industrial Organization, Elsevier, vol. 90(C).
    16. Brian Cepparulo, 2022. "The impact of COVID-19 restrictions on economic activity: Evidence from the Italian regional system," French Stata Users' Group Meetings 2022 15, Stata Users Group.
    17. Herby, Jonas & Jonung, Lars & Hanke, Steve, 2022. "A Literature Review and Meta-Analysis of the Effects of Lockdowns on Covid-19 Mortality - II," MPRA Paper 113732, University Library of Munich, Germany.
    18. Bussolo,Maurizio & Sarma,Nayantara & Torre,Ivan, 2022. "Indirect Effects of COVID-19 Nonpharmaceutical Interventions on Vaccine Acceptance," Policy Research Working Paper Series 10106, The World Bank.
    19. Maciej Stefański, 2022. "GDP effects of pandemics: a historical perspective," Empirical Economics, Springer, vol. 63(6), pages 2949-2995, December.
    20. Jing Lian Suah, 2024. "The "plucking" model of the unemployment rate floor: Corss-country estimates and empirics," BIS Working Papers 1159, Bank for International Settlements.

    More about this item

    Keywords

    panel local projections; lockdown shocks; spillovers; Covid-19; pandemic;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mar:magkse:202215. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bernd Hayo (email available below). General contact details of provider: https://edirc.repec.org/data/vamarde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.