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Supply Chain Interconnectedness in Times of Crises: A Gravity Model with DiD Analysis of COVID-19 Effects on Central and Eastern European Trade

Author

Listed:
  • Arūnas Burinskas

    (Faculty of Economics and Business Administration, Vilnius University, LT-10222 Vilnius, Lithuania)

  • Viktorija Cohen

    (Faculty of Economics and Business Administration, Vilnius University, LT-10222 Vilnius, Lithuania)

  • Jolanta Droždz

    (Faculty of Economics and Business Administration, Vilnius University, LT-10222 Vilnius, Lithuania)

Abstract

This paper explores the impact of COVID-19-induced disruptions on supply chains, specifically focusing on the interconnectedness of supply chains and the transmission effects they cause. The gravity model framework, together with difference-in-differences analysis, is employed to analyze monthly trade patterns among Central and Eastern European (CEE) countries, Western European countries, and other trading partner countries. The model presented accounts for the country’s roles in global value chains (GVCs) by incorporating data related to exports, imports of intermediate and capital goods, and imports of final consumption goods. CEE countries have demonstrated a certain resilience during the COVID-19 pandemic. Yet, they were not immune to adverse consequences due to disrupted supply chains, primarily in the imports of intermediate and capital goods. We find that the countries that suffered from the COVID-19 pandemic the least demonstrated remarkable resilience against disrupted GVCs. The findings of our study enrich the literature on the effects of the COVID-19 pandemic, specifically for the CEE region, by providing a framework for understanding the pandemic’s impact on international trade. The results show that supply shock might be greater than demand shocks on production and trade dynamics. Furthermore, our results suggest that policymakers seek adaptability to changing supply and demand patterns, while enterprises should consider broader diversification both within the region and locally.

Suggested Citation

  • Arūnas Burinskas & Viktorija Cohen & Jolanta Droždz, 2023. "Supply Chain Interconnectedness in Times of Crises: A Gravity Model with DiD Analysis of COVID-19 Effects on Central and Eastern European Trade," Economies, MDPI, vol. 12(1), pages 1-14, December.
    • Handle: RePEc:gam:jecomi:v:12:y:2023:i:1:p:12-:d:1311494
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    References listed on IDEAS

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    1. Head, Keith & Mayer, Thierry, 2014. "Gravity Equations: Workhorse,Toolkit, and Cookbook," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 131-195, Elsevier.
    2. Javier Barbero & Juan José de Lucio & Ernesto Rodríguez-Crespo, 2021. "Effects of COVID-19 on trade flows: Measuring their impact through government policy responses," PLOS ONE, Public Library of Science, vol. 16(10), pages 1-20, October.
    3. Meier, Matthias & Pinto, Eugenio, 2024. "COVID-19 Supply Chain Disruptions," European Economic Review, Elsevier, vol. 162(C).
    4. Sawik, Tadeusz, 2022. "Stochastic optimization of supply chain resilience under ripple effect: A COVID-19 pandemic related study," Omega, Elsevier, vol. 109(C).
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