Gürtler, Maike (2020) The effect of the Covid-19 shock on trade. Bachelor, Social Sciences.
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Abstract
The striking and unprecedented economic shock caused by the Covid-19 pandemic offers a rare opportunity to further contemporary findings about trade, global value chains, and countries’ shock vulnerability. This paper investigates the mechanisms through which the Covid-19 shock effects trade, and makes predictions about the long-run recovery. This paper applies fundamental trade theory, shock theory, and macroeconomic perspectives to illuminate the fragile relationships that make up our global trade apparatus. The literature review concluded that trade and global value chains act as channels to spread shocks on a global scale. The Covid-19 shock specifically impacts labor and capital investment in both countries, which significantly affects output and trade in the short-run. However, differences in the composition of trade as well as the position in the global value chain, moderate this effect in the long-run. The analysis finds that countries in the beginning of the global value chain have little ability to recover from shocks. Through their dependency on trade, they are heavily reliant on foreign demand and supply of goods. Thus, this paper concludes that in order for trade to return to its pre-crisis growth path in the long-run, developed countries located at the end of global value chains need to increase output to stimulate global trade.
| Type: | Thesis (Bachelor) |
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| Major: | Social Sciences |
| Supervisor: | Jong-A-Pin, R.M. |
| Datum van aanlevering: | 08 Jul 2020 09:31 |
| Last modified: | 08 Jul 2020 09:31 |
| URI: | http://ucg.studenttheses.ub.rug.nl/id/eprint/57 |
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