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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

Author

Listed:
  • Sebastian Barnes
  • Robert Hillman
  • George Wharf
  • Duncan MacDonald

Abstract

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.

Suggested Citation

  • Sebastian Barnes & Robert Hillman & George Wharf & Duncan MacDonald, 2021. "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," OECD Economics Department Working Papers 1674, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:1674-en
    DOI: 10.1787/b6805eed-en
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    Cited by:

    1. Harasztosi, Péter & Maurin, Laurent & Pál, Rozália & Revoltella, Debora & van der Wielen, Wouter, 2022. "Firm-level policy support during the crisis: So far, so good?," International Economics, Elsevier, vol. 171(C), pages 30-48.
    2. Enisse Kharroubi, 2022. "Growth expectations and the dynamics of firm entry," BIS Working Papers 1036, Bank for International Settlements.

    More about this item

    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;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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