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Fiscal Stimulus and Firms’ Sales and Capital Expenditure During the Global Financial Crisis

Carolina Correa-Caro (), Leandro Medina (), Marcos Poplawski-Ribeiro () and Bennett Sutton ()
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Carolina Correa-Caro: Inter-American Development Bank
Bennett Sutton: International Monetary Fund

Comparative Economic Studies, 2021, vol. 63, issue 3, No 9, 489-535

Abstract: Abstract Using firm-level data from the Refinitiv Datastream Worldscope database for more than 17,253 non-financial firms in 45 advanced and emerging economies, this paper examines how fiscal stimulus interacted with sectoral business cycle sensitivity has affected firms’ sales and capital expenditures during the global financial crisis. Cross-sectional analyses indicate that reductions in structural fiscal balances are associated with higher firms’ sales and capital expenditures (as percentage of their total assets) in 2009. This result is obtained notably for the manufacturing and construction industries and for different regions depending on the firm performance variable. Our findings have key implications for the design of fiscal response to shocks at industry and firm levels, including during the current COVID-19 pandemic.

Keywords: Fiscal stimulus; Global financial crisis; Firm sales and capital expenditures; Firm-level data (search for similar items in EconPapers)
JEL-codes: C33 E32 E62 H62 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1057/s41294-021-00160-5

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