Following the onset of the coronavirus disease (COVID‐19) pandemic, social distancing and government-mandated lockdowns became the norm. These measures have limited interactions among people, firms, and society, triggering an even larger decline in economic activity. In this study, we apply annual Japanese foreign affiliate data to quantify how COVID-19 has affected various aspects of firm behavior. The estimation results show that both the revenue and purchasing behavior of Japanese foreign affiliates have been affected by COVID-19. This negative impact occurred mainly through stringent regulations imposed by the host countries where affiliates are located. In general, these findings indicate that COVID-19 has negatively affected Japanese firms engaged in overseas activities. This leaves us with the question of when external shocks such as COVID-19 hinder firms’ overseas activities and what role the government should play to achieve a balance between safety and economic revival.
CHEN et al. (Sat,) studied this question.