Taking the Scenic Route

Sammanfattning

This paper examines the impact of the 2022 Russian airspace closure on bilateral trade flows between four Nordic countries (Sweden, Norway, Finland, and Denmark) and two East Asian economies (Japan and South Korea). By employing a novel approach combining Coarsened Exact Matching with the Synthetic Control Method, a synthetic control unit is constructed for each of the sixteen country-pairs, allowing for estimation of the treatment effect. The analysis finds substantial negative effects for multiple country-pairs and reveals directional asymmetries. In-space placebo tests are conducted to verify robustness, finding strong support for several results. This paper contributes to a broader literature examining the effect of air transport on bilateral trade and extends the application of the Synthetic Control Method in trade contexts.