The impact of COVID-19 on corporate fragility in the United Kingdom: Insights from a new calibrated firm-level Corporate Sector Agent-Based (CAB) Model
George Wharf and
No 1674, OECD Economics Department Working Papers from OECD Publishing
Covid-19 and the associated restrictions on interaction have led to an unprecedented shock to activity and firms’ balance sheets. To assess the impact, this paper applies a new large-scale firm-level simulation model calibrated to the United Kingdom (UK). The paper specifically examines the Coronavirus Job Retention Scheme (CJRS) furlough program and a credit guarantee.The Corporate Sector Agent-Based (CAB) Model (Hillman, Barnes, Wharf and MacDonald, 2021) takes into account: heterogeneity across firms; interactions between firms across a realistic customer-supplier network; and rule-of-thumb behaviour by firms and bankruptcy constraints. The model amplifies the effect of shocks and generates substantial persistence and overshooting, as well as displaying a number of non-linearities. The CAB uses a data-rich approach based on ORBIS firm-level data and the OECD Input-Output tables. Simulations in this paper are calibrated to the observed path of UK output in 2020.
Keywords: agent-based modelling; bankruptcy; Covid-19; credit guarantees; financial stability; firm dynamics; firm-level data; input-output analysis; network analysis; short-time working schemes (search for similar items in EconPapers)
JEL-codes: D21 D22 D57 D85 E27 G33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cmp, nep-hme, nep-mac, nep-ore and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:oec:ecoaaa:1674-en
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