Long-COVID? Medium-Term Impact of the Corona Virus Pandemic on Decisions of Firms
Project period: March 2022 - December 2024
Research Areas:
Tasks
This project investigates the medium-term effects of the coronavirus pandemic on fim decisions. In this context, different potential channels will be explored. Due to the size and unpredictability of the shock, the crisis offers a unique opportunity to gain causal evidence for important economic relationships whose significance goes beyond the current crisis.
One focus lies on the analysis of firms' investment activity, which could remain inhibited by the consequences of the coronavirus pandemic in the medium term. For example, a lack of financial resources due to pandemic-related liquidity and solvency problems, weakened corporate balance sheets, and restrained lending could have an inhibiting effect. In addition, persistently high uncertainty about future development of demand, which could be due to, e.g. the risk of rising corporate insolvencies, could have a dampening effect on investment activity (see, e.g., Acharya and Steffen, 2020 and Bundesbank, 2020). In contrast, survey results from the ifo Institute suggest that investment in digitization, for example, is likely to continue to increase in the wake of the pandemic-related surge in digitization, even after the crisis (Demmelhuber et al., 2021).
Methods
For this study, we draw on micro data from the ifo business surveys in order to be able to examine various channels of the pandemic on firm decisions using micro-econometric techniques and quasi-experimental methods.
Data and Other Sources
The main data sources are the micro data of surveys conducted by the ifo Institute. In particular, the monthly ifo Business Survey and the semiannual ifo Investment Survey of the manufacturing sector play an important role. The micro data are available as panels covering several decades each, and are linked to fundamental data (balance sheet and P&L) from the data provider ORBIS. Furthermore, the ifo surveys are supplemented by special questions tailored to the research question at hand.
