Seminario CEDE - Pierre-Olivier Gourinchas

We estimate the impact of COVID-19 on business failures for small and medium sized enterprises (SMEs) using firm-level data in seventeen countries. Absent government support, the failure rate of SMEs would have increased by 9.1 percentage points, representing 4.6 percent of private sector employment. Resulting non-performing loans are modest, decreasing the riskweighted common equity Tier-1 capital ratio from 14.1 to 12 percent. Government support limited to “at-risk” firms would have low fiscal costs (0.8% of GDP). Less targeted policies such as government guaranteed loans are similarly effective, but substantially more expensive, with disbursed funds representing up to 5.8% of GDP.