An empirical analysis using panel data gravity models and scenario forecast simulations for the Romanian exports in the context of COVID-19

Abstract

The paper focuses on the trade performance of Romania, a representative country for the Central and Eastern European region, strongly connected with its European partners in global value chains and thus affected by any change in these countries' relationships with the rest of the world in general and China in particular. Using panel data gravity models for the 2008-2019 period, we find that Romania's exports are significantly influenced by the demand of its major trade partners in the EU, and imports from China and the rest of the world. In addition, exports are vulnerable to the effectiveness of the government in relation to the other countries, corruption control and cultural values such as collectivism. We also assess the capacity of Romanian exports to regain their ascending trend displayed before the COVID-19 pandemic by using simulation forecasting scenarios based on the shape of the economic recovery and the type of shock transmission across economies. We observe a sharp decrease in 2020 followed by an important recovery in 2021 in a V-shape scenario and uniform transmission of the pandemic shock in the internal demand and in the foreign trade, or followed by a very slow recovery in 2021 (in a U-shape scenario and non-uniform transmission type in the two previously mentioned elements), especially when the global relation with rest of the world is included.

An anatomy of the impact of COVID‐19 on the global and intra‐Commonwealth trade in goods

“…Studies examining the relationship between trade and COVID‐19 focus mainly on GVCs and whether these absorbed or transmitted COVID‐19 shocks. For example, Davidescu et al ( 2022 ) finds that Romania, which is connected with its European partners through GVCs, is affected by changes in partner countries' relationships with the rest of the world. The authors find that Romanian exports are vulnerable to government effectiveness in relation to the other countries, as well as corruption control and cultural values.…”

COVID-19 Pandemic and Export: Evidence from Lithuania

“…They concluded that trade in services declined twice as much as trade in goods and claimed that there is no relationship between the amount of the decline and product complexity. Davidescu et al (2021) constructed a gravity model for Romania's export and claimed that better institutions (e. g. lower corruption, etc.) positively affect country's export and noticed a clustering with the other institutionally similar countries.…”

“…The gravity model was constructed following its theoretical foundations presented by Tinbergen (1962), Anderson (1979), van Wincoop (2003), andAnderson (2011). However, based on the availability of data (international statistic offices still do not provide export data for the full year 2020), and following Davidescu et al (2021), Shahriar et al (2021) and Zainuddin et al (2022), I chose the gravity model of only one exporting country.…”

Determinants of Bangladesh’s Leather Exports to Its Major Trade Partners: A Panel Gravity Model Approach

“…The COVID-19 pandemic has caused a shock in both demand and supply. A drop in imports from China or the rest of the world has contributed to the reduction of the export flows (Davidescu et al, 2021). A field survey could be undertaken to gather the basic insights and experiences of the main stakeholders who are actively involved in the leather industry of Bangladesh.…”