Targeted asset purchases and business dynamism
49 Pages Posted: 19 Jan 2023 Last revised: 9 Jan 2024
Abstract
Do targeted asset purchases alter business dynamism of SMEs and their plants? We find that plants linked to banks that were exposed to the first targeted asset purchases by the ECB are approximately 20\% less likely to exit. The effect varies depending on the capitalization of banks and productivity of firms. We study entry dynamism by aggregating half of the population of German plants and observe lower entry rates for high exposed regions. Meanwhile, unemployment rates are lower. Our findings can shed light on potential side effects of a crisis tool implemented by the ECB to prevent a resurgence of the European sovereign debt crisis while interest rates are rising.
Keywords: SMEs, plants, market exits and entries, asset purchases, Securities Market Program (SMP), crisis instruments, Transmission Protection Instrument (TPI)
JEL Classification: E58, G21, G28, G33
Suggested Citation: Suggested Citation