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Fiscal Stimulus and Firms’ Sales and Capital Expenditure During the Global Financial Crisis

Author

Listed:
  • Carolina Correa-Caro

    (Inter-American Development Bank)

  • Leandro Medina

    (International Monetary Fund)

  • Marcos Poplawski-Ribeiro

    (International Monetary Fund)

  • Bennett Sutton

    (International Monetary Fund)

Abstract

Using firm-level data from the Refinitiv Datastream Worldscope database for more than 17,253 non-financial firms in 45 advanced and emerging economies, this paper examines how fiscal stimulus interacted with sectoral business cycle sensitivity has affected firms’ sales and capital expenditures during the global financial crisis. Cross-sectional analyses indicate that reductions in structural fiscal balances are associated with higher firms’ sales and capital expenditures (as percentage of their total assets) in 2009. This result is obtained notably for the manufacturing and construction industries and for different regions depending on the firm performance variable. Our findings have key implications for the design of fiscal response to shocks at industry and firm levels, including during the current COVID-19 pandemic.

Suggested Citation

  • Carolina Correa-Caro & Leandro Medina & Marcos Poplawski-Ribeiro & Bennett Sutton, 2021. "Fiscal Stimulus and Firms’ Sales and Capital Expenditure During the Global Financial Crisis," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 63(3), pages 489-535, September.
    • Handle: RePEc:pal:compes:v:63:y:2021:i:3:d:10.1057_s41294-021-00160-5
    DOI: 10.1057/s41294-021-00160-5
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    More about this item

    Keywords

    Fiscal stimulus; Global financial crisis; Firm sales and capital expenditures; Firm-level data;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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