THE IMPACT OF COVID-19 ON TAIWAN’S INTERNATIONAL TRADE: AN APPLICATION OF DIFFERENCE IN DIFFERENCE ANALYSIS

Abstract

The onset of the COVID-19 pandemic has unexpectedly changed the usual shape of the world routine. Precisely, its spread has had an enormous impact on the businesses and economies of countries across the globe. To curb the further spread of the virus, countries across the globe imposed an array of nonpharmaceutical measures such as lockdowns, travel restrictions, social distancing, mandatory maskwearing, hand sanitizing, curfews, hygiene, public health emergency concern, school closures, and many more. While anecdotal evidence indicates that these government stringency measures worsened the impact of COVID-19 on international trade, this study attempted to systematically explore this phenomenon by employing the Difference in Differences (DID) technique to assess the impact of COVID-19 on Taiwan's net export using secondary data. To estimate the unobserved counterfactual level of Taiwan’s net exports had the country imposed stringent COVID-19 measures, we employed five other Asian trading partners (all of which imposed lockdowns in 2020) to constitute the pool of treatment units. The study used data collected from the Our World in Data website for the period from dating January 2018 to June 2021. Stata 15 was used to analyze the data. By and large, the DID model results established that Taiwan’s net exports significantly increased during the time that it did not implement stringent COVID-19 measures relative to the unobserved counterfactual scenario for those countries which adopted such stringent measures. More crucially, our baseline results remain robust to other sensitivity test, vindicating our identification strategy.