Measuring the impact of COVID-19 and government policy responses on trade flow: the case of ASEAN countries

Abstract:
Purpose
This paper aims to quantify the impact of the COVID-19 pandemic on bilateral trade flows among 10 ASEAN countries from January 2020 to December 2022. It also evaluates the effectiveness of government policy responses and the moderating role of regional trade agreements (RTAs) in alleviating trade disruption.

Design/methodology/approach
Using monthly bilateral trade panel data, we employ the pseudo-Poisson maximum likelihood (PPML) estimator to estimate a gravity model of trade. The analysis incorporates COVID-19 severity, four distinct government response indices and interaction terms with RTAs to identify their effects on trade flows.

Findings
The results indicate that the COVID-19 pandemic significantly reduced trade flows among ASEAN nations. However, economic support measures exhibited a positive and significant moderating effect on trade, in contrast to other more restrictive responses. Furthermore, regional trade agreements were found to consistently enhance trade value and to strengthen the positive effects of economic support while mitigating the adverse impacts of containment policies. This suggests that RTAs not only promote trade but also serve as institutional buffers during global crises.

Research limitations/implications
The analysis focuses on bilateral trade flows, potentially overlooking broader multilateral dynamics. Additionally, variations in the scope and enforcement of government policies across countries may not be fully captured due to data constraints.

Originality/value
This study provides empirical evidence on how targeted economic support and regional integration via RTAs can sustain trade during global shocks like COVID-19. It contributes to the literature by demonstrating the synergistic role of RTAs in amplifying the effectiveness of national policy responses and offering practical insights for enhancing economic resilience in emerging economies.