|Publication type:||Article in scientific journal|
|Type of review:||Peer review (publication)|
|Title:||COVID-19 : guaranteed loans and zombie firms|
|Published in:||CESifo Economic Studies|
|Publisher / Ed. Institution:||Oxford University Press|
|Subjects:||COVID-19; Expectation; Financial constraint; Firm behavior; Zombie firm|
|Subject (DDC):||330: Economics|
|Abstract:||Based on a survey (7–13 April 2020) we evaluate the reaction of Swiss firms towards the COVID-19 crisis. Firms show little pro-active reactions towards the crisis, but decrease their business activities. The firms in the survey report that the decline in foreign demand is the single most important reason for their deteriorating business situation. Firms that faced a more difficult business situation before the crisis are affected more severely during the crisis. Moreover, we investigate the impact of the Swiss federal loan program (Bundeshilfe) on the business activities. To this end, we develop a stylized theoretical model of financially constrained heterogeneous firms. We find that policy makers face a trade-off between immediate higher unemployment rates and long-term higher public spending. The former arises from a combination of a too strong economic impact of the COVID-19 lockdown (demand drop) and too low levels of loans provided. Nevertheless, providing (too) high levels of loans to firms creates zombie firms that are going to default in the future leading to an increase in public spending. (JEL codes: D22, D25, D84, and G33)|
|Fulltext version:||Published version|
|License (according to publishing contract):||Licence according to publishing contract|
|Departement:||School of Management and Law|
|Organisational Unit:||International Management Institute (IMI)|
|Appears in collections:||Publikationen School of Management and Law|
Files in This Item:
There are no files associated with this item.
Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.