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Zombification of the economy? Assessing the effectiveness of French government support during COVID-19 lockdown

Author

Listed:
  • Mattia Guerini

    (UniBs - Università degli Studi di Brescia = University of Brescia)

  • Lionel Nesta

    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur)

  • Xavier Ragot

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Stefano Schiavo

    (UNITN - Università degli Studi di Trento = University of Trento)

Abstract

This paper evaluates the risk of zombification of the French economy during the sanitary crisis, as a result of the unconditional financial support provided to firms by public authorities. We develop a simple theoretical framework based on a partialequilibrium model to simulate the liquidity and solvency stress faced by a large panel of French firms and assess the impact of government support measures. Simulation results suggest that those policies helped healthy but illiquid firms to withstand the shock caused by the pandemic. Moreover, the analysis finds no evidence of a “zombification effect†, as government support has not disproportionately benefited less productive companies.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Mattia Guerini & Lionel Nesta & Xavier Ragot & Stefano Schiavo, 2024. "Zombification of the economy? Assessing the effectiveness of French government support during COVID-19 lockdown," SciencePo Working papers Main hal-04391356, HAL.
    • Handle: RePEc:hal:spmain:hal-04391356
    DOI: 10.1016/j.jebo.2023.12.013
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    References listed on IDEAS

    as
    1. Caselli, Mauro & Nesta, Lionel & Schiavo, Stefano, 2021. "Imports and labour market imperfections: Firm-level evidence from France," European Economic Review, Elsevier, vol. 131(C).
    2. Ryan Banerjee & Boris Hofmann, 2022. "Corporate zombies: anatomy and life cycle," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 37(112), pages 757-803.
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    4. David Baqaee & Emmanuel Farhi, 2022. "Supply and Demand in Disaggregated Keynesian Economies with an Application to the COVID-19 Crisis," American Economic Review, American Economic Association, vol. 112(5), pages 1397-1436, May.
    5. Viral V. Acharya & Matteo Crosignani & Tim Eisert & Christian Eufinger, 2020. "Zombie Credit and (Dis-)Inflation: Evidence from Europe," NBER Working Papers 27158, National Bureau of Economic Research, Inc.
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    8. repec:imf:imfdps:2022/002 is not listed on IDEAS
    9. Tommaso Ferraresi & Leonardo Ghezzi & Fabio Vanni & Alessandro Caiani & Mattia Guerini & Francesco Lamperti & Severin Reissl & Giorgio Fagiolo & Mauro Napoletano & Andrea Roventini, 2021. "On the Economic and Health Impact of the COVID-19 Shock on Italian Regions: A Value Chain Approach," GREDEG Working Papers 2021-18, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
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    Cited by:

    1. Turco, Enrico & Bazzana, Davide & Rizzati, Massimiliano & Ciola, Emanuele & Vergalli, Sergio, 2023. "Energy price shocks and stabilization policies in the MATRIX model," Energy Policy, Elsevier, vol. 177(C).
    2. Enrico Turco & Davide Bazzana & Massimiliano Rizzati & Emanuele Ciola & Sergio Vergalli, 2022. "Energy price shocks and stabilization policies in a multi-agent macroeconomic model for the Euro Area," Working Papers 2022.25, Fondazione Eni Enrico Mattei.
    3. Lily Davies & Mark Kattenberg & Benedikt Vogt, 2023. "Predicting Firm Exits with Machine Learning: Implications for Selection into COVID-19 Support and Productivity Growth," CPB Discussion Paper 444, CPB Netherlands Bureau for Economic Policy Analysis.

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    More about this item

    JEL classification:

    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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