Navigating the Storm: The Impact of Covid-19 on Turkish Exports

Abstract

The Covid-19 pandemic had a significant impact on global exports. The outbreak of the virus disrupted supply chains and caused a sharp decrease in demand for goods and services, which resulted in a decline in manufactured exports worldwide. In this study, we investigate the effect of Covid-19 on Turkish manufacturing exports by using a firm-product level dataset at monthly frequency over 2019-2021. In particular, we aim to understand the heterogeneous impact of the pandemic on different types of products in terms of their substitutability, complexity and factor intensity. We also disentangle the diversified repercussions of the shock by taking into consideration the participation of firms in GVCs. Our results suggest that the Covid-19 pandemic has led to a drop in Turkish firms' exports especially in the first 6-months of 2020 and their recovery has only became apparent in the second half of 2021. Also, firms exporting less substitutable, more complex and sophisticated goods, as well as goods with higher-physical and human-capital intensity have experienced a milder drop in their exports after the shock and have recovered faster. Moreover, exporting firms that are more involved in GVCs by sourcing their intermediates abroad have been less resilient as they were more exposed to the risk of supply chain disruptions. This higher risk exposition should be assessed together with their lower resilience associated with the properties of their output (less sophisticated, low human capital intensive and highly substitutable products).