How Do Firms Cope with Economic Shocks in Real Time?

Thiemo Fetzer (), Christina Palmou and Jakob Schneebacher ()
Additional contact information
Thiemo Fetzer: University of Warwick & University of Bonn
Christina Palmou: Office for National Statistics (ONS), UK
Jakob Schneebacher: Competition and Markets Authority (CMA), UK & King’s College London

No 337, ECONtribute Discussion Papers Series from University of Bonn and University of Cologne, Germany

Abstract: We study how businesses adjust to significant rises in energy costs. This matters for both the current energy crisis and the longer-term shift towards Net Zero. Using firm-level real-time survey and administrative data backed by a pre-registered analysis plan, we examine how firms respond to the energy price shock triggered by Russia's invasion of Ukraine along output, price, input, process and survival margins. We find that, on average, firms pass on some cost increases, build up cash reserves, and face higher debt, but do not yet see layoffs or bankruptcies. However, effects are highly heterogeneous by size and industry: for instance, small firms tend to increase cash reserves and prices, while large firms invest more in capital. We estimate separate elasticities for many small industry cells and subsequently use k-means clustering techniques on the estimated effects to identify high-dimensional firm-adaptation archetypes. These estimates can help tailor firm support in the energy transition both in the short and the long term. More generally, the machinery developed in this paper enables policymakers to evaluate and adjust economic policy in near-real time.

Keywords: Energy price shock; firm dynamics; climate change; high-dimensional analysis (search for similar items in EconPapers)
JEL-codes: D22 D24 H23 L11 O30 (search for similar items in EconPapers)
Pages: 125 pages
Date: 2024-10
New Economics Papers: this item is included in nep-cfn, nep-cis, nep-ene, nep-env and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_337_2024.pdf First version, 2024 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ajk:ajkdps:337

Access Statistics for this paper

More papers in ECONtribute Discussion Papers Series from University of Bonn and University of Cologne, Germany Niebuhrstrasse 5, 53113 Bonn, Germany.
Bibliographic data for series maintained by ECONtribute Office ().