Template-Type: ReDIF-Paper 1.0
Author-Name: Deniz Igan
Author-X-Name-First: Deniz
Author-X-Name-Last: Igan
Author-Name: Ali Mirzaei
Author-X-Name-First: Ali
Author-X-Name-Last: Mirzaei
Author-Name: Tomoe Moore
Author-X-Name-First: Tomoe
Author-X-Name-Last: Moore
Title: A shot in the arm: stimulus packages and firm performance during Covid-19
Abstract: We use firm-level data to provide some early evidence on the effectiveness of COVID-19 economic policy packages. Our empirical strategy relies on the varying degree of vulnerability to the pandemic across industries. We find a robust association of fiscal stimulus with changes in firm performance indicators (as measured by sales-to-assets ratio, profit margin, interest coverage ratio as well as probability of default) in pandemic-prone sectors. We also observe marginal effects of monetary policy on the sales-to-assets ratio and of foreign exchange intervention on the interest coverage ratio in the hardest-hit firms. These results broadly survive a battery of exercises to address endogeneity. Additionally, we show that firms with a better financial position are more likely to take advantage of the stimulus packages to withstand the pandemic shock. Overall, these provide preliminary evidence suggesting that policy interventions have bought time for the hardest-hit industries, by supporting turnover and improving liquidity.
Length: 64 pages
Creation-Date: 2022-05
File-URL: https://www.bis.org/publ/work1014.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1014.htm
File-Format: text/html
Number: 1014
Keywords: economic stimulus, pandemic-prone, COVID-19, policy effectiveness
Classification-JEL: G01, G14, G28, E65
Handle: RePEc:bis:biswps:1014