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We estimate the impact of the COVID-19 crisis on business failures among small and medium size enterprises (SMEs) in seventeen countries using a large representative firm-level database. We use a simple model of firm cost-minimization and measure each firm’s liquidity shortfall during and after COVID-19. Our framework allows for a rich combination of sectoral and aggregate supply, productivity, and demand shocks. We estimate a large increase in the failure rate of SMEs under COVID-19 of nearly 9 percentage points, ab-sent government support. Accommodation & Food Services, Arts, Entertainment & Recreation, Education, and Other Services are among the most affected sectors. The jobs at risk due to COVID-19 related SME business failures represent 3.1 percent of private sector employment. Despite the large impact on business failures and employment, we estimate only moderate effects on the financial sector: the share of Non Performing Loans on bank balance sheets would increase by up to 11 percentage points, representing 0.3 percent of banks’ assets and resulting in a 0.75 percentage point decline in the common equity Tier-1 capital ratio. We evaluate the cost and effectiveness of various policy interventions. The fiscal cost of an intervention that narrowly targets at risk firms can be modest (0.54% of GDP). However, at a similar level of effectiveness, non-targeted subsidies can be substantially more expensive (1.82% of GDP). Our results have important implications for the severity of the COVID-19 recession, the design of policies, and the speed of the recovery.

Czech Republic

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This paper discusses operational issues for countries that want to reform their monetary policy frameworks. It argues that stabilizing short-term interest rates on a day-to-day basis has significant advantages, and thus that short-term interest rates, not reserve money, in most cases should be the daily operating target, including for countries relying on a money targeting policy strategy. The paper discusses how a policy formulation framework based on monetary aggregates can be combined with an operational framework that ensures more stable and predictable short-term rates to enhance policy transmission. It also discusses how to best configure an interest-rate-based operational framework when markets are underdeveloped and liqudity management capacity is weak.

Czech Republic

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CESEE countries lag in terms of infrastructure compared to the EU15, and deficient infrastructure is often cited as a constraint to growth and convergence. Investing in infrastructure is therefore an important long-standing policy issue for the region. In the context of the Covid-19 pandemic, infrastructure investment has also gained some ground as economies look to support activity in the recovery phase once the virus has been contained. Against this backdrop, this project seeks to benchmark infrastructure in CESEE, assess the macro impact of higher infrastructure investment, and discuss policies issues to maximize such impact. First, we benchmark infrastructure in the region versus the EU15, across various infrastructure sectors and using different methodologies. Second, deploying empirical estimates and model-based simulations, we analyze the macroeconomic impact of boosting infrastructure investment. Third, we present an in-depth analysis of policy issues: enhancing public investment management, managing fiscal risks, and mobilizing private sector participation.

Czech Republic

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Economic schools --- Czech Republic

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Archaeology - Czech Republic - History - 19th century --- Archaeology - Methodology --- Excavations (Archaeology) - Czech Republic --- Czech Republic - Antiquities