TRADE DEFICIT AND THE COVID-19 PANDEMIC IN 2020: EVIDENCE FROM NIGERIA / Trade Deficit and the Covid-19 Pandemic in 2020: Evidence From Nigeria

Year 2021, Volume: 5 Issue: 1, 199 - 210, 30.04.2021

Jimoh Saka

https://doi.org/10.29216/ueip.909898

Abstract

In this paper, the relationship between trade deficit and Corona Virus pandemic is examined using daily data spanning the period February-December, 2020. COVID-19 related variables employed are number of confirmed cases, number of discharged cases, total death cases and tested cases. To control for omitted variable bias, the paper considers inclusion of some economic variables such as exchange rate, inflation rate and interest rate. Using the S-estimation of the Robust Least Square, it is found that total death cases and test cases trigger more trade deficit. Increase in the number of discharged cases necessarily reduces trade deficit due to more active labour force. Depreciation of the naira triggers trade deficit due to short fall in supply and rising costs of importation. Hence, Nigeria should focus more on domestic production, increasing financing of small and medium scale enterprises alongside with adhering to COVID-19 protocol to further boost trade and economic growth.

Keywords

Trade deficit, COVID-19 pandemic, Robust Least Squares

References

• Anderson, J. & van Wincoop, E. (2004). Trade Costs. Journal of Economic Literature, 17, 691–751.
• Bekkers, E., Keck, A., Koopman, R. & Nee, C. (2020). Methodology for the WTO trade forecast of april 8 2020. World Trade Organization. Retrieved from: https://www.wto.org/english/news_e/pres20_e/methodpr855_e.pdf
• Bloom, E., V. de Wit, & Carangal-San Jose M. J. (2005). Potential Economic Impact of an Avian Flu Pandemic on Asia. ERD Policy Brief No.42.
• Boissay, F. & Rungcharoenkitkul, P. (2020). Macroeconomic effects of Covid-19: An early review. BIS Bulletin, 7. Retrieved from: https://www.bis.org/publ/bisbull07.pdf
• Eichenbaum, M., Rebelo, S. & Trabandt, M. (2020). The Macroeconomics of Epidemics. National Bureau of Economic Research (NBER): Working Paper 26882. Retrieved from: https://www.nber.org/papers/w26882.pdf
• Emma A. & Madeleine L. (2020).Did the 1918 Influenza Pandemic Affect International Trade? Thesis Work, Lund University
• Erokhin, V., & Gao T. (2020). Impacts of COVID-19 on Trade and Economic Aspects of Food Security: Evidence from 45 Developing Countries. International Journal of Environmental Research and Public Health 1-28
• Estevadeordal, A., Brian F., & Taylor, A.M. (2003). The Rise and Fall of World Trade, 1870–1939. Quarterly Journal of Economics, 118(2), 359–407.
• Jacks, D. S., Christopher M. M.,& Dennis N. (2008). Trade Costs, 1870-2000. American Economic Review, 98 (2), 529-34.
• Jonung, L. & Roeger, W. (2006). The Macroeconomic Effects of a Pandemic in Europe. A Model-Based Assessment. European Economy - Economic papers, 251. European Commission. Retrieved from: https://ec.europa.eu/economy_finance/publications/pages/publication708_en.pdf
• Maliszewska, M., Mattoo, A., & Van Der Mensbrugghe, D. (2020). The potential impact of COVID-19 on GDP and trade: A preliminary assessment. Policy Research Working Paper 9211.