Liquidity Shortfalls during the COVID-19 Outbreak: Assessment and Policy Responses

Difficultés financières des entreprises pendant l’épidémie de Covid‑19 et réponses des politiques publiques: une évaluation

Lilas Demmou, Guido Franco, Sara Calligaris and Dennis Dlugosch
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Lilas Demmou: OCDE / OECD - Organisation de Coopération et de Développement Economiques = Organisation for Economic Co-operation and Development
Sara Calligaris: OCDE / OECD - Organisation de Coopération et de Développement Economiques = Organisation for Economic Co-operation and Development
Dennis Dlugosch: OCDE / OECD - Organisation de Coopération et de Développement Economiques = Organisation for Economic Co-operation and Development

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Abstract: The paper investigates the impact of stylised policy measures on the financial vulnerability of non‑financial firms during the COVID‑19 pandemic crisis. It evaluates the extent to which firms run into a liquidity crisis following the COVID‑19 outbreak and the impact of policies to reduce the risks of such a crisis. The analysis relies on: an accounting model, a large dataset reporting firms' balance sheets for 14 countries and data on the magnitude of the shock at the sector level. Results suggest that, without any policy intervention, up to 38% of firms were to face liquidity shortfalls after ten months since the implementation of confinement. Comparing the impact of different policies, the analysis shows that government support to relieve wage bills is the most effective tool, followed by debt moratorium policies. Finally, the paper zooms into labour market policies and compares the cost‑efficiency of short‑term work and wage subsidies schemes, highlighting how their relative efficiency depends on their design.

Keywords: COVID-19; liquidity; cash; job retention; préservation de l'emploi; trésorerie; liquidités; Covid-19 (search for similar items in EconPapers)
Date: 2022
Note: View the original document on HAL open archive server: https://insee.hal.science/hal-05206885v1
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Published in Economie et Statistique / Economics and Statistics, 2022, 532-33, pp.47 - 61. ⟨10.24187/ecostat.2022.532.2070⟩

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Journal Article: Liquidity Shortfalls during the COVID 19 Outbreak: Assessment and Policy Responses (2022)
Working Paper: Liquidity shortfalls during the COVID-19 outbreak: Assessment and policy responses (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05206885

DOI: 10.24187/ecostat.2022.532.2070

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