engleski

COVID-19 effects on unit prices of selected medical good in international trade

MOTIVATION COVID-19 presents a perfect stochastic shock that caused severe economic disruptions all over the world. Due to the vast number of measures and restrictions that the national government introduced as a response to the COVID-19 pandemic, international trade was particularly negatively affected in the first couple of months of the pandemic. This paper investigates the impact of COVID-19 on unit prices of COVID-19 related medical good, i.e., facemasks. RESEARCH QUESTION The paper investigates the effects of COVID-19 on unit prices of selected, COVID-19 related medical good - facemasks. The question is how much of the covid-19 effects can be attributed to supply determinants, like the share of imports from China in total imports of facemasks, and how much can be attributed to demand determinants like the population size of the particular country. METHODOLOGY Our analysis is based on a monthly trade data for the year 2020 and includes 107 countries. Data comes from UN-Comtrade and Our World in Data COVID-19 dataset. We develop an econometric model with import unit values as the dependent variable and the share of imports from China in total imports of facemasks, the number of total trading partners, the interaction between two variables, and the number of COVID-19 cases in the population as independent variables. We estimate the model using Poisson Pseudo Maximum Likelihood (PPML) estimator. RESULTS Our results show that both supply and demand variables have a strong and statistically significant effect on the rise of import unit values of facemasks. The coefficient of the interaction variable between the share of imports from China in total imports of facemasks and the number of total trading partners is the only negative, which shows the importance of diversified imports on unit values in the case of significant spikes in demand. CONTRIBUTION Our paper adds to the empirical research of the demand and supply conditions on the value of goods in international trade. Using the COVID-19 pandemic as a backdrop, we quantified the effects of a supply glut on the price of a particular good and compared them to demand-side effects. The results can serve policymakers to consider channeling investments toward strategically important goods.

Unit values ; facemasks ; supply ; demand

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