A shot in the arm: stimulus packages and firm performance during Covid-19

Deniz Igan, Ali Mirzaei and Tomoe Moore

No 1014, BIS Working Papers from Bank for International Settlements

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.

Keywords: economic stimulus; pandemic-prone; COVID-19; policy effectiveness (search for similar items in EconPapers)
JEL-codes: E65 G01 G14 G28 (search for similar items in EconPapers)
Pages: 64 pages
Date: 2022-05
New Economics Papers: this item is included in nep-bec, nep-cba, nep-eff, nep-mac and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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