Dear Divisha,

I guess you'll find none, especially one fitting to present world, where commercial ties between countries are much stronger than in the past. Hence, I would recommend you to look at theories related to recession and war situations. Also, look at how facts unfolded and what type of responses were set, in order to adjust to reality.

Hereunder, an example:

Initially, there has been mostly a psychological effect, damaging countries where the spread of COVID was recorded earlier (fear of contagion via merchandise, simple thoughts of "punishment"). Lockdown in most countries severely damaged international trade, as factories were closed to. Expectations on the severeness of the crisis might have contributed. Typically, when a recession comes, the first industries whose trade suffers are those of capital goods (why should I renew my machineries when demand will be low, better postpone) and intermediate goods (first I use what I have in stock, then we see). On the other hand, prompt interventions by many governments (I am thinking of the US and the EU) smoothened expectations and the impact of the downturn itself. This might be different for countries where the room for maneuver is lesser. The slump in that case might hit harder, so that their imports would tend to fall also in the coming years...

Best wishes for your dissertation

Dear Andrea de Panizza ,

Thank you so much for the guidance on my question, it is a great help.

After reading a lot, psychological effects (fear psychosis), lockdown, government policies (social distancing, limited trade practices), banking and financial institution (reduction in capital, un-productive loans) and all the factors mentioned by you have been the major reason why MSME are not able to do production and hence there has been a decline in export performance. Do you suggest any theory or model for this case?

I need theories to support my dissertation and provide a literature evidence to it.

Hi Divisha Goenka

I agree with Andrea de Panizza the concept of recession may be useful in understanding the correlation between the pandemic and export performance. Explicitly, the pandemic in the destination country affects export performance of the source country. As the disease spread demand in the destination country drops As the pandemic cannot be controlled immediately people loss confidence in the economy, And, as demand deteriorates, the country falls into a recession. Consequently, imports from the source country plunges. When more destination countries are hit by the pandemic, export performance of the source country worsens.

When the source country experiences the pandemic too, industries which produce export goods as well as the supporting industries may be closed due to lockdown. Export performance is surely damaged. However, this is a health crises, not an economic one. Thus, it requires health measures instead of economic ones.

Hi Yudhi Dharma Nauly

Thank you so much for the guidance on my question, provided a great help.

Could you further guide me on how can I state a theoretical base for my research. Would using theories of recession (Keynesian/Austrian) in relation to covid-19 and export performance will do justice?

Yes, I believe Keynesian view on recession would be appropriate.

Yudhi Dharma Nauly provided a good suggestion. Also, you could look at literature on external shocks. All in all, the issue is whether this shock will be a lasting one (thinking of merchandise exports) or only transitory. A lot of money is being put in advanced economies to support businesses and demand. But...