Lockdown spillovers*

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.