Fiscal Stimulus Impact on Firms' Profitability During the Global Financial Crisis

39 Pages Posted: 14 Jan 2019

See all articles by Carolina Correa-Caro

Carolina Correa-Caro

Universidad Central - Economics Department

Leandro Medina

George Washington University - Department of Economics; International Monetary Fund (IMF) - Western Hemisphere Department

Marcos Poplawski-Ribeiro

International Monetary Fund (IMF)

Bennett Sutton

International Monetary Fund (IMF)

Date Written: November 2018

Abstract

Using financial statement data from the Thomson Reuter's Worldscope database for 22,333 non-financial firms in 52 advanced and emerging economies, this paper examines how fiscal stimulus (i.e., changes in structural deficit) interacted with sectoral business cycle sensitivity affected corporate profitability during the recovery period of the global financial crisis (GFC). Using cross-sectional analyses, our findings indicate that corporate profitability improved significantly after the GFC fiscal stimulus, especially in manufacturing, utilities and retail sectors. Firm size and leverage are also found to be significant in explaining changes in corporate profitability.

Keywords: Fiscal stimulus, Global financial crisis, 2008-2009, Profits, Fiscal policy, Business cycles, Emerging markets, Developed countries, Global Financial Crisis, Worldscope, Firm Profitabilit, Firm Profitability, Models with Panel Data, Deficit

JEL Classification: C33, E32, E62, H62

Suggested Citation

Correa-Caro, Carolina and Medina, Leandro and Poplawski-Ribeiro, Marcos and Sutton, Bennett, Fiscal Stimulus Impact on Firms' Profitability During the Global Financial Crisis (November 2018). IMF Working Paper No. 18/251. Available at SSRN: https://ssrn.com/abstract=3314583

Carolina Correa-Caro (Contact Author)

Universidad Central - Economics Department ( email )

Bogotá
Colombia

Leandro Medina

George Washington University - Department of Economics ( email )

Monroe Hall, Suite 340
2115 G Street, NW
Washington, DC 20052
United States

International Monetary Fund (IMF) - Western Hemisphere Department

700 19th Street NW
Washington, DC 20431
United States

Marcos Poplawski-Ribeiro

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Bennett Sutton

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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