Demand and Supply Shocks : Evidence from Corporate Earning Calls
This paper quantifies global demand, supply, and uncertainty shocks and compares two major global recessions: the 2008–09 Great Recession and the COVID-19 pandemic. Two alternative approaches are used to decompose economic shocks: text mining techn...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2022
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/299521643742060995/Demand-and-Supply-Shocks-Evidence-from-Corporate-Earning-Calls http://hdl.handle.net/10986/36923 |
| Summary: | This paper quantifies global demand,
supply, and uncertainty shocks and compares two major global
recessions: the 2008–09 Great Recession and the COVID-19
pandemic. Two alternative approaches are used to decompose
economic shocks: text mining techniques on earning call
transcripts and a structural Bayesian vector autoregression
model. The results highlight sharp contrast in the size of
supply and demand shocks over time and across sectors. While
the Great Recession was characterized by demand shocks,
COVID-19 caused sizable disruptions to both demand and
supply. These shocks were broad-based with varying relative
importance across major sectors. Furthermore, certain
sub-sectors, such as professional and business services,
internet retail, and grocery/department stores, fared better
than others during the pandemic. The results imply that both
targeted policies and conventional countercyclical fiscal
and monetary policy can accelerate the economic recovery.
Large demand shocks highlight an environment of deficient
demand with countercyclical policy calibrated to the size of
these shocks. |
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