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Corporate Liquidity and Solvency in Europe during COVID-19: The Role of Policies
Author:
Mr. Christian H Ebeke
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,
Nemanja Jovanovic
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Ms. Laura Valderrama
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https://orcid.org/0000-0001-5968-6092
, and
Jing Zhounull

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Series:
IMF Working Papers
Volume/Issue:
Volume 2021: Issue 056
Language:
English
Publication Date:
02 Mar 2021
DOI:
https://doi.org/10.5089/9781513570914.001
ISBN:
9781513570914
ISSN:
1018-5941
Pages:
48
Keywords:
corporate vulnerability; solvency risk; liquidity risk; policy effectiveness; WP; cash flow; illiquid firm; firm level; management action; insolvent firm; liquidity deficit
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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The spread of COVID-19, containment measures, and general uncertainty led to a sharp reduction in activity in the first half of 2020. Europe was hit particularly hard—the economic contraction in 2020 is estimated to have been among the largest in the world—with potentially severe repercussions on its nonfinancial corporations. A wave of corporate bankruptcies would generate mass unemployment, and a loss of productive capacity and firm-specific human capital. With many SMEs in Europe relying primarily on the banking sector for external finance, stress in the corporate sector could easily translate into pressures in the banking system (Aiyar et al., forthcoming).
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2021: Issue 056