SMEs and the macroeconomic response to Covid-19
Lead Research Organisation:
University of Kent
Department Name: Sch of Economics
Abstract
This research studies the effects of UK and devolved nation government policy responses to the Covid-19 UK epidemic on small and medium enterprises (SMEs). Our framework will incorporate SMEs into a general equilibrium model of the UK economy, allowing us to understand important spillover effects of policies directed towards SMEs across devolved nations and industries. Our model permits analysis of the effects of policies on the underlying factors determining firms' ability to borrow. Our model also permits analysis of the conditions under which firms' financing and business decisions contribute to increases in wider financial instability, and how policies can be designed in a way that reduces the incentives for firms inadvertently to increase financial instability and exacerbate the effects of crises.
Organisations
Publications
Duncan A J
(2021)
Reverse mode differentiation for DSGE models
Duncan A J M
(2022)
Prudential Fiscal Stimulus
| Description | The new discoveries resulting from this report are (1) a new method for estimating macroeconomic models, tailored for models that allow for interactions between industries; and (2) government stabilisation policies used in during the pandemic can have positive effects on the risk taking incentives of businesses, and we can quantify these effects. These two discoveries are presented in two research paper outputs, and codes have been made public for the first discovery. Engagement achievements to date include two central bank visits in Lithuania and New Zealand, the main financial stability policymakers in those countries. Engagement also includes academic conference presentations, and local BBC radio interviews reaching a wider audience. The findings also informed a Covid-19 policy response evaluation for the Kent County Council. |
| Exploitation Route | The finding in output (1) can be used to broaden the set of macroeconomic models that can be efficiently estimated, allowing for more realism and more disaggregation by industry, skills, region, and other dimensions. The finding in output (2) can be used to support the analysis of stabilisation policy responses (both fiscal and macroprudential) to future crises and recessions, beyond pandemics. The model in the final planned output can be used to study financial stability spillovers in economies disaggregated by industry, supporting the analysis of future industrial strategy and financial stability policies. All of these outcomes are relevant to the analysis of macroeconomic policies both during epidemics but also in more general economic crises. |
| Sectors | Financial Services, and Management Consultancy,Government, Democracy and Justice |
| Description | The findings have contributed to the analysis of the Kent Covid-19 Policy review, produced for Kent County Council in March 2022 as part of the C-Care European Regional Development Fund programme. The research has led to invited presentations on the main findings of the research to a UK MP, New Zealand Treasury officials, and policymakers at central banks in New Zealand and Lithuania. The research has informed interviews on BBC radio Kent on UK government economic policy responses to the pandemic. |
| First Year Of Impact | 2022 |
| Sector | Government, Democracy and Justice |
| Impact Types | Policy & public services |
| Description | Kent CCare Covid-19 Policy Response Review |
| Geographic Reach | Local/Municipal/Regional |
| Policy Influence Type | Citation in systematic reviews |
| Title | Reverse mode derivatives for DSGE models |
| Description | This is a new mathematical result that allows macroeconomists to estimate standard macroeconomic models with frontier estimation algorithms developed in other sciences, including Hamiltonian Monte Carlo and Variational Inference. In particular, this work makes it more feasible to estimate high-dimensional macroeconomic models. |
| Type Of Material | Data analysis technique |
| Year Produced | 2021 |
| Provided To Others? | Yes |
| Impact | The work was required for one of the outputs of the project. The researchers have also found this new technique helpful in other research projects, not yet published. Codes are available in GitHub for other researchers to use. |
| URL | https://github.com/alfredjmduncan/DifferentiableDSGE.jl |
| Description | Central Bank Visit (Bank of Lithuania) |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Policymakers/politicians |
| Results and Impact | (Planned for 17 May 2022) I have been invited to spend a week at the Bank of Lithuania and present a paper from this research project on 17 May 2022 to their research and policy teams. The Bank of Lithuania is the primary financial stability and macroprudential policy institution in Lithuania. The research visit is funded by the Bank of Lithuania (flights, accommodation and maintenance). |
| Year(s) Of Engagement Activity | 2022 |
| Description | Central Bank Visit (Reserve Bank of New Zealand) |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Policymakers/politicians |
| Results and Impact | (Planned for 14 April 2022) I have been invited to visit the RBNZ (Reserve Bank of New Zealand) to meet with local policy and research teams, as well as to present findings from this research in the inaugural RBNZ-AUT (Auckland University of Technology) seminar on the 14th of April. This has also lead to planned further engagement, with a further funding award of 2,000 GBP to support an academic visit to RBNZ in September-October 2022 to produce a research paper with local researchers on macroprudential policy. |
| Year(s) Of Engagement Activity | 2022 |
| Description | Conference Presentation (Scottish Economic Society Annual Conference) |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Professional Practitioners |
| Results and Impact | (Planned for 25 April 2022) Findings from this research will be presented at the Scottish Economic Society Annual Conference. Financial stability policy sessions at this conference are regularly attended by academic economists as well as Bank of England policy and research economists, Scottish Government economists and third sector economists. |
| Year(s) Of Engagement Activity | 2022 |
| Description | Conference presentation (Money macro finance conference) |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Professional Practitioners |
| Results and Impact | 25 participants attended conference presentation at the Money Macro Finance conference, the UK's leading macroeconomics conference attracting an international audience. Audience included academic as well as official audience members from the European Central Bank and Eurosystem national central banks. Discussion followed afterwards about the key points from the paper and how it informs debate about the relative merits of different labour market policies introduced during the pandemic. |
| Year(s) Of Engagement Activity | 2022 |
| Description | Interview for BBC radio Kent |
| Form Of Engagement Activity | A press release, press conference or response to a media enquiry/interview |
| Part Of Official Scheme? | No |
| Geographic Reach | Regional |
| Primary Audience | Public/other audiences |
| Results and Impact | Interviewed twice for BBC Radio Kent (Drive time show on 17 November 2021 and Breakfast show on 15 December 2021) about UK fiscal policy measures and economic performance as the economy emerged from the Covid-19 pandemic. The research project was not the focus of these interviews, but findings from the research helped inform my responses to questions. The BBC Sounds URL to this episode ( https://www.bbc.co.uk/sounds/play/p0b053jn ) is no longer active. Following these interviews, I have been invited on BBC Radio Kent three further times to discuss UK government policy, as well as LBC radio and BBC 5 live. |
| Year(s) Of Engagement Activity | 2021 |
| Description | Invited seminar presentation (University of Auckland) |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Professional Practitioners |
| Results and Impact | (Planned for 8 April 2022) I have been invited to visit the University of Auckland and present findings from this research in their Economics Seminar Series. |
| Year(s) Of Engagement Activity | 2022 |
| Description | Invited seminar presentation (Victoria University of Wellington) |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Professional Practitioners |
| Results and Impact | (Planned for 1 April 2022) I have been invited to visit Victoria University of Wellington to present findings from this research in their Economics Seminar Series. |
| Year(s) Of Engagement Activity | 2022 |
| Description | Local MP visit and presentation of interim findings |
| Form Of Engagement Activity | Participation in an open day or visit at my research institution |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Policymakers/politicians |
| Results and Impact | Local MP Sir Roger Gale visited the University of Kent on July 23 2021 in order to meet with local UKRI award holders. I gave a 10 minute presentation of interim findings of the research to date. |
| Year(s) Of Engagement Activity | 2021 |
| Description | New Zealand Treasury visit |
| Form Of Engagement Activity | A formal working group, expert panel or dialogue |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Policymakers/politicians |
| Results and Impact | (Planned for April 2022) I have been invited to meet with the macroeconomics policy and research group at New Zealand Treasury, to discuss findings from this project and related research. This meeting will take place in April 2022. |
| Year(s) Of Engagement Activity | 2022 |