How do firms cope with economic shocks in real time?

Thiemo Fetzer, Christina Palmou, Jakob Schneebacher and Ivan Yotzov
Additional contact information
Christina Palmou: Office for National Statistics (ONS)
Jakob Schneebacher: Competition and Markets Authority (CMA), and affiliated with King's College London (KCL) and the Economic Statistics Centre of Excellence (ESCoE)

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: In a turbulent world, effective policy requires granular estimates of firm responses to shocks as they unfold. We develop a replicable framework that combines high frequency administrative and survey microdata with a pre-registered shift-share de sign to estimate multi-margin firm responses in real time. We show that the resulting coefficient vectors can be interpreted as first-order perturbations of firms' optimal response functions. We apply the framework to the 2021-2023 UK energy price shock and find that energy-intensive firms pass on cost increases, build cash reserves and shift towards homeworking. We find little evidence of aggregate employment losses or firm exits. Responses are highly heterogeneous: small firms drive price pass through; large firms, capital investment. We show that our real-time estimates are consistent with the UK's structural business survey, released two years later, and across survey instruments. We apply the framework out of sample and in real time to the energy price shock triggered by the 2026 US-Israeli strikes on Iran and discuss implications for the design of energy support schemes and environmental policy. (Updated July 2026)

Keywords: real-time evaluation; firm dynamics; economic shocks; energy prices JEL Classification: C23; D22; D24; H23; L11 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-cis, nep-env and nep-inv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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https://warwick.ac.uk/fac/soc/economics/research/c ... tions/wp722.2024.pdf

Related works:
Working Paper: How do firms cope with economic shocks in real time? (2026)
Working Paper: How Do Firms Cope with Economic Shocks in Real Time? (2024)
Working Paper: How Do Firms Cope with Economic Shocks in Real Time? (2024)
Working Paper: How do firms cope with economic shocks in real time? (2024)
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