A shot in the arm: stimulus packages and firm performance during COVID-19

Abstract

We provide some early evidence on the effectiveness of COVID-19 economic policy packages. Our empirical strategy uses firm-level data and relies on the varying degree of vulnerability to the pandemic across industries. We find a robust association of fiscal stimulus with changes in firm performance indicators (as measured by sales-to-assets ratio, profit margin, interest coverage ratio as well as probability of default) in pandemic-prone sectors. We also observe marginal effects of monetary policy on the sales-to-assets ratio and of foreign exchange intervention on the interest coverage ratio in the hardest-hit firms. Overall, the preliminary evidence suggests that policy interventions have bought time for the hardest-hit industries, by supporting turnover and improving liquidity.