THE INVASION OF UKRAINE AND ITS CONSEQUENCES ON FINNISH EXPORTS: A SYNTHETIC CONTROL METHOD ANALYSIS

Abstract

The Russian invasion of Ukraine in February 2022 resulted in a major shock to international trade, affecting European economies through sanctions, energy price volatility, and supply-chain disruptions. This thesis analyses the impact of the invasion on Finnish exports. The study applies the synthetic control method to estimate how total exports in Finland would have developed without the conflict using trade data from UNCTADstat and macroeconomic control variables provided by the World Bank database. The results indicate that Finnish exports weakened after 2022 relative to their expected trajectory. Placebo tests and MSPE ratios suggest that this deviation in exports was large compared to the donor pool used in the analysis.