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Credit crunch is biggest risk to our Covid recovery


The bigger risk, according to Mr Gourinchas’ research – conducted with economists from the Canadian central bank and the US Federal Reserve system – is that banks stop lending to the economy as a whole.
In this case, the rate of business failures would rise by almost 8.5 percentage points relative to normal times.
“Such a contraction would disproportionately impact ‘strong’ firms, i.e. firms that otherwise would not need fiscal support to survive Covid-19 in 2020,” the study showed.
“Even in that scenario, the large business failures would not arise from excessively generous 2020 policies that just delayed the inevitable. Instead, they would be a new blow, coming from the contraction of credit to the corporate sector.” ....

United States , Pierre Olivier Gourinchas , University Of California , Us National Bureau For Economic Research , Covid Restrictions Support Scheme , ஒன்றுபட்டது மாநிலங்களில் , பல்கலைக்கழகம் ஆஃப் கலிஃபோர்னியா , எங்களுக்கு தேசிய பணியகம் க்கு பொருளாதார ஆராய்ச்சி ,