The impact of COVID-19 on corporate fragility in the United Kingdom: Insights from
a new calibrated firm-level Corporate Sector Agent-Based (CAB) Model
Covid-19 and the associated restrictions on interaction have led to an unprecedented
shock to activity and firms’ balance sheets. To assess the impact, this paper applies
a new large-scale firm-level simulation model calibrated to the United Kingdom (UK).
The paper specifically examines the Coronavirus Job Retention Scheme (CJRS) furlough
program and a credit guarantee.
The Corporate Sector Agent-Based (CAB) Model (Hillman, Barnes, Wharf and MacDonald,
2021) takes into account: heterogeneity across firms; interactions between firms across
a realistic customer-supplier network; and rule-of-thumb behaviour by firms and bankruptcy
constraints. The model amplifies the effect of shocks and generates substantial persistence
and overshooting, as well as displaying a number of non-linearities. The CAB uses
a data-rich approach based on ORBIS firm-level data and the OECD Input-Output tables.
Simulations in this paper are calibrated to the observed path of UK output in 2020.
Published on July 13, 2021
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