Estimating the impacts of US tariffs on UK exports of single malt Scotch whisky

This discussion paper aims to estimate the impact of US tariffs on UK exports of single malt Scotch whisky between Q4 2019 – Q4 2020 using the novel synthetic control method.


5 Synthetic Control Weights

The synthetic control methodology described in Section 3.1 consists of an optimisation process with two parts: (i) finding a combination of countries in the donor pool that best resembles the pre-treatment predictor values of the US (inner optimisation), and (ii) finding the optimal weights on these predictors so as to best resemble the export value of the US (outer optimisation). In practice, we end up with a set of weights put on both countries and predictors.

The various sets of specifications tested – quarterly and monthly specifications with or without a first or seasonal lagged dependent variables included – all lead to slightly different country and predictor weights. The weights for the 'headline' (quarterly first-lagged) specifications are presented here (with value, quantity, or price as the dependent variables).

Table 3. Country and predictor weights for the first-lag quarterly specification
Dependent variable Top country weights Top predictor weights
Value Canada 24.8% Lagged dep. var. > 99.9%
France 22.8% GBP exchange rate < 0.01%
Australia 16.4% Interest rate 0.0%
Further 9 countries 35.9% Other predictors 0.0%
Quantity Canada 56.0% Alcohol cons. 78.7%
South Korea 15.3% Lagged dep. var. 21.2%
Australia 9.8% Interest rate < 0.01%
Further 8 countries 18.9% Other predictors < 0.01%
Price Switzerland 37.9% Lagged dep. var. 96.3%
Australia 13.6% GBP exchange rate 3.3%
Lithuania 11.8% Final consumption 0.4%
Further 7 countries 36.7% Other predictors < 0.01%

Note that not all countries in the donor pool (or predictors) will necessarily have a weight associated with them.

In many cases, the weights obtained were similar between these specifications and those with other lagged dependent variables. A more complete set of weights associated to the quarterly specifications can be found in Annex B – Intermediate Synthetic Control Outputs.

Contact

Email: agric.stats@gov.scot

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