Estimating SME Failures in Real Time

Download or read book Estimating SME Failures in Real Time written by Pierre-Olivier Gourinchas and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a flexible framework for tracking business failures during economic downturns. Our framework combines firm-level data with a model of cost-minimization where firms react to a rich set of shocks and fail if illiquid. After verifying that our methodology approximates past official failure rates, we apply it to the COVID-19 crisis in 11 countries. Absent government support, SME failures would have increased by 6.15 percentage points, representing 3.15 percent of employment. We find little threat to financial stability. Commonly implemented COVID-19 policies saved firms but were costly because funds were directed to firms that could survive without support.