Bouncing back: how mothballing curbs prices

Thibaut Duprey (), Artur Kotlicki, Daniel Rigobon () and Philip Schnattinger ()
Additional contact information
Thibaut Duprey: Bank of Canada
Daniel Rigobon: drigobon@princeton.edu
Philip Schnattinger: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH

No 1112, Bank of England working papers from Bank of England

Abstract: We investigate the macroeconomic impacts of mothballed businesses – those that closed temporarily – on sectoral equilibrium prices after a negative demand shock. First, we introduce a new establishment-level data set derived from Google Places. We confirm the importance of temporary closures during the Covid-19 pandemic. Data on establishment reviews also suggests that preventing productive businesses from permanently exiting could support employment. Second, we embed these findings into a model of heterogeneous firm dynamics. By maintaining productive capacity during downturns, temporary closures initially support employment and subsequently reduce price pressures. Our results suggest that pandemic fiscal support for temporary closures may have eased inflationary pressures.

Keywords: Business entry and exit rate; temporary business closure; Google Places; equilibrium supply (search for similar items in EconPapers)
JEL-codes: C55 C81 D22 E32 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2025-01-24
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Related works:
Working Paper: Bouncing Back: How Mothballing Curbs Prices (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:1112

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