Research Economic Seminar: Crisis in Trade shocks and product quality

Since 2018, the United Kingdom and United States of America have been contemplating restrictive trade policies. In 2020, the COVID-19 lockdown hit the world economy. At the end of 2022, embargo on imports of oil and gas from Russia are supposed to enter into force. In this paper, we quantify the outcomes of those major trade shocks with a series of counterfactual simulations. We rely on a general equilibrium model with domestic sectoral linkages, trade in intermediate goods and sectoral heterogeneity in production. Our theoretical contribution lies in considering the product quality in the analysis of welfare outcomes.