expect the upstream shock variable to be positively associated with export growth in the exporting countries (i.e. a positive 6 ). Disruptions in industrial production in source countries are expected to be linked to declines in exports in the exporting country, as exporters face bottlenecks in imported inputs. ββ

# **2.3 Data**

For the estimations we use monthly bilateral trade data for a total of 28<sup>13</sup> exporting countries covering the period from January/February to June 2020, the first phase of the pandemic. Data were collected from the Covid-19 Trade Watch (World Bank, 2020): specific sources of data are, respectively, customs for China, Eurostat for the European Union, Ministry of Finance for Japan, and U.S. International Trade Commission for the United States. Export data are aggregated at the ISIC Rev. 3 4-digit level, which consists of over 140 sectors. Bilateral annualized export growth in a sector ( _growthijkt_ ) is computed based on export levels for a month in 2020 relative to export levels of the same month in 2019. The estimations exclude mining sectors such as oil and coke from the sample. We also winsorize<sup>14</sup> the export growth data and exclude Serbia as partner country in order to deal with extreme outliers.

To assess the demand and supply shocks that economies experience as a result of Covid-19 we use monthly information from the Google mobility data from the Covid-19 Global Community Reports<sup>15</sup> which are published on a daily basis for 132 countries. The Google mobility growth rate captures peoples’ movement trends across different places and is provided relative to the median daily value from the 5 ‐ week period from January 3 to February 6, 2020 (the baseline day). We select two components of Google mobility, namely work mobility ( _work mobilityit_ ) and retail and recreation mobility ( _retail mobilityjt_ ) to measure, respectively, the supply and demand shocks of the pandemic. Work mobility measures mobility trends for places of work, while retail and recreation mobility capture m <mark>obility trends for places like restaurants, cafes, shopping centers, theme parks, museums, libraries, and movie theaters. We compute the mean over all daily measures to obtain monthly Google mobility measures.</mark> <mark>Changes in industrial production relative to the previous year are calculated using the industrial production index (IPI) from UNIDO,</mark><sup>16</sup> <mark>which is available on a monthly basis for a set of 60 countries.</mark>

> 13 The 28 exporting countries include all members of the European Union excluding Cyprus, Japan and the United States. While Chinese trade data are also available, the trade data are combined for January and February due to the Chinese New Year. As Google mobility data (our measure of the shock) are not available for China, our baseline regressions do not include China. 14 Trade growth data at the exporter-partner-sector level exceeding the top (99) percentile and those below the bottom (1) percentile of the distribution are set to the growth rates of these percentiles, respectively.

> 15 <u>https://www.google.com/covid19/mobility/</u>

> 16 <u>https://stat.unido.org/database/Monthly%20IIP</u>

12