Research
Publications
Supporting SMEs during COVID-19: The case for targeted equity injections, Economic Letters, 2022
with Federico J. Diez and Romain Duval
We analyze the potential role of equity injections in addressing solvency risks among small and medium-sized enterprises (SMEs) after the COVID-19 crisis. Building on firm-level balance sheet projections for a sample of European economies, we simulate selected policy interventions and find that equity injections are quite effective at dampening the rise in insolvencies. Cost effectiveness requires careful targeting, however; under an illustrative scenario, leaving aside any costs arising from imperfect information and implementation, the cost of a program targeting only those SMEs worth saving is just a tenth of the cost of an untargeted approach directed to all insolvent firms. Overall, our paper provides a case for governments to rely more on targeted equity injections in responding to major shocks that trigger mass solvency risks.
Working Papers
What is the Impact of Increased Business Competition? R&R Journal of Political Economy: Macroeconomics
with Sonia Felix (Banco de Portugal)
This paper studies the macroeconomic effect and underlying firm-level transmission channels of a reduction in business entry costs. We provide novel evidence on the response of firms’ entry, exit, and employment decisions. To do so, we use as a natural experiment a reform in Portugal that reduced entry time and costs. Using the staggered implementation of the policy across the Portuguese municipalities, we find that the reform increased local entry and employment by, respectively, 25% and 4.8% per year in its first four years of implementation. Moreover, around 60% of the increase in employment came from incumbent firms expanding their size, with most of the rise occurring among the most productive firms. Standard models of entry, exit, and firm dynamics, which assume a constant elasticity of substitution, are inconsistent with our findings of expansionary and heterogeneous response across incumbent firms. We show that a model with heterogeneous firms and variable markups accounts for our evidence. In this framework, the most productive firms face a lower demand elasticity and increase their employment in response to the entry of new firms.
Geoeconomic Fragmentation and Commodity Markets IMF Working Paper 23/201
with Jorge Alvarez, Mehdi Benatiya Andaloussi, Alexandre Sollaci, Martin Stuermer and Petia Topalova (all IMF)
This paper studies the economic impact of fragmentation of commodity trade. We assemble a novel dataset of production and bilateral trade flows of the 48 most important energy, mineral and agricultural commodities. We develop a partial equilibrium framework to assess which commodity markets are most vulnerable in the event of trade disruptions and the economic risks that they pose. We find that commodity trade fragmentation – which has accelerated since Russia’s invasion of Ukraine – could cause large price changes and price volatility for many commodities. Mineral markets critical for the clean energy transition and selected agricultural commodity markets appear among the most vulnerable in the hypothetical segmentation of the world into two geopolitical blocs examined in the paper. Trade disruptions result in heterogeneous impacts on economic surplus across countries. However, due to offsetting effects across commodity producing and consuming countries, surplus losses appear modest at the global level.
Work in Progress
Commodities Trade Fragmentation and Market Power
with David Dongyoon Shin (Duke) and Alexandre Sollaci (IMF)
Selected IMF Work and Publications
Fragmentation and Commodity Markets: Vulnerabilities and Risks
with Jorge Alvarez, Mehdi Benatiya Andaloussi, Christopher Evans, Marika Santoro, Alexandre Sollaci, Martin Stuermer and Petia Topalova (all IMF)
Chapter 3 in the October 2023 World Economic Outlook. IMF 2023.
Additional Coverage: IMF Blog
with Mehdi Benatiya Andaloussi, John Christopher Bluedorn and Daniel Leigh (all IMF)
Chapter 1 in the April 2023 World Economic Outlook. IMF 2023.
Inflation Peaking Amid Low Growth
with Mehdi Benatiya Andaloussi, Niels-Jakob Harbo H Hansen and Daniel Leigh (all IMF)
January 2023 World Economic Outlook Update. IMF 2023.
Inclusiveness, Growth and Stability
with Xin Tang (IMF)
Chapter 2 in "Promoting Inclusive Growth in the Middle East and North Africa". IMF 2022.
with Azhin Abdulkarim, Adrian Alter, Shant Arzoumanian, Karim Badr, Hippolyte Balima, Aymen Belgacem, Olivier Bizimana, Roberto Cardarelli, Matt Gaertner, Mahmoud Harb, Mariam El Hamiani Khatat, Chiara Maggi, Priscilla Muthoora, and Jerome Vacher
IMF Departmental Paper No 2022/011; June 2022
with Federico J. Diéz, Romain Duval, Jose Carrido, Sebnem Kalemli-Ozcan, Maria Soledad Martinez Peria, and Nicola Pierri.
IMF Staff Discussion Note No. SDN/2021/002; April 2021
see also the IMF blog article here and Box 1.3. Rising Small and Medium Enterprise Bankruptcy and Insolvency Risks: Assessment and Policy Options, WEO October 2020, Chapter 1
Rising Corporate Market Power: Emerging Policy Issues
with Ufuk Akcigit, Wenjie Chen, Federico J. Diéz, Romain A Duval, Philipp Engler, Jiayue Fan, Marina Mendes Tavares, Daniel A Schwarz, Ippei Shibata, Carolina Villegas-Sanchez
IMF Staff Discussion Note No. SDN/2021/001; March 2021
with Chi Mai Dao (IMF), IMF Working Paper 18/262
Brief Abstract: We document a rise in gross savings and net lending of non-financial corporations across major industrialized countries over the last two decades. Using cross-country and firm-level data, we show that it is mostly driven by rising profitability and falling financing costs. On the other hand, higher corporate savings have not supported a commensurate increase in fixed capital investment. Instead, they led to a build-up of liquid financial assets (cash) on corporate balance sheets.