Romania’s International Trade in Goods After the COVID-19 Crisis: Where to? An Empirical Investigation Based on Granger Causality Analysis

Abstract

International trade was one of the most affected following the Covid-19 crisis and it is also envisaged to be shaped by important alterations. Romania, being part of global value chains, is prone to such mutations. Therefore, our aim is to draw a picture of actual evolutions and to identify risks and opportunities in international trade’s development. We notice that the containment measures have already had an uneven impact on international trade, generating the largest drop in both trade of goods and services in the last years. We deepen our investigation on the evolution of Romania’s international trade using monthly data in order to evidence the changes induced during the spread of the pandemic. We discover that the Covid-19 crisis had a larger impact on Romania’s international trade than the one felt during the economic crisis during 2008–2009. In addition, we use a VECM model and Granger analysis for examining the nature of the relationship between Romanian exports of goods and services and EU international trade for the period 2000–2019, based on quarterly data. Our aim is to examine if Romanian exports bring their contribution to the total EU imports as well as to the total EU exports, highlighting the long-run equilibrium relationship. We find that that a 1% increase in Romanian exports contributes to an increase in the EU exports and imports to about 0.55% over the next four quarters.