The Economic Effects of COVID-19 and Credit Constraints: Evidence from Italian Firms' Expectations and Plans

64 Pages Posted: 31 Aug 2020

See all articles by Pierluigi Balduzzi

Pierluigi Balduzzi

Boston College - Carroll School of Management

Emanuele Brancati

Sapienza University of Rome; IZA Institute of Labor Economics; Sapienza University of Rome - Faculty of Economics

Marco Brianti

Boston College

Fabio Schiantarelli

Boston College - Department of Economics; IZA Institute of Labor Economics

Abstract

We investigate the economic effects of the COVID-19 pandemic and the role played by credit constraints in the transmission mechanism, using a novel survey of expectations and plans of Italian firms, taken just before and after the outbreak. Most firms revise downward their expectations for sales, orders, employment, and investment, while prices are expected to increase at a faster rate, with geographical and sectoral heterogeneity in the size of the effects. Credit constraints amplify the effects on factor demand and sales of the COVID-19 generated shocks. Credit-constrained firms also expect to charge higher prices, relative to unconstrained firms. The search for and availability of liquidity is a key determinant of firms' plans. Finally, both supply and demand shocks play a role in shaping firms' expectations and plans, with supply shocks being slightly more important in the aggregate.

Keywords: COVID-19, pandemic, firms' expectations, firms' plans, credit constraints, prices, employment, investment, sales, orders

JEL Classification: E2, E3, G30, I10

Suggested Citation

Balduzzi, Pierluigi and Brancati, Emanuele and Brianti, Marco and Schiantarelli, Fabio, The Economic Effects of COVID-19 and Credit Constraints: Evidence from Italian Firms' Expectations and Plans. IZA Discussion Paper No. 13629, Available at SSRN: https://ssrn.com/abstract=3682943 or http://dx.doi.org/10.2139/ssrn.3682943

Pierluigi Balduzzi (Contact Author)

Boston College - Carroll School of Management ( email )

Department of Finance
140 Commonwealth Avenue - Fulton Hall 438
Chestnut Hill, MA 02467
United States
617-552-3976 (Phone)
617-552-0431 (Fax)

HOME PAGE: http://www.bc.edu/bc_org/avp/csom/faculty/

Emanuele Brancati

Sapienza University of Rome ( email )

via Castro del Laurenziano 9
Roma, IA Rome 00191
Italy

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Sapienza University of Rome - Faculty of Economics ( email )

Via del Castro Laurenziano 9
Rome, 00161
Italy

Marco Brianti

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Fabio Schiantarelli

Boston College - Department of Economics ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States
617-552-4512 (Phone)
617-552-2308 (Fax)

HOME PAGE: http://https://sites.google.com/a/bc.edu/fabio-schiantarelli/

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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