Bouncing Back: How Mothballing Curbs Prices

We investigate the macroeconomic impacts of mothballed businesses—those that closed temporarily—on sectoral equilibrium prices after a negative demand shock. First, we introduce a new establishment-level dataset derived from Google Places. We confirm the importance of temporary closures during the COVID-19 pandemic. Data on establishment reviews also suggests that preventing productive businesses from permanently exiting could support employment. Second, we embed these findings into a model of heterogeneous firm dynamics. By maintaining productive capacity during downturns, temporary closures initially support employment and subsequently reduce price pressures. Our results suggest that pandemic fiscal support for temporary closures may have eased inflationary pressures.

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Publication Details

Journal
Econstor (Econstor)
Published
2024-12-20
DOI
https://doi.org/10.34989/swp-2024-51
Primary Topic
Classical Studies and Legal History
Type
article
Field-Weighted Citation Impact
0.00
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article

Bouncing Back: How Mothballing Curbs Prices

Econstor (Econstor)
Classical Studies and Legal History
article

Bouncing Back: How Mothballing Curbs Prices

article en

Abstract

We investigate the macroeconomic impacts of mothballed businesses—those that closed temporarily—on sectoral equilibrium prices after a negative demand shock. First, we introduce a new establishment-level dataset derived from Google Places. We confirm the importance of temporary closures during the COVID-19 pandemic. Data on establishment reviews also suggests that preventing productive businesses from permanently exiting could support employment. Second, we embed these findings into a model of heterogeneous firm dynamics. By maintaining productive capacity during downturns, temporary closures initially support employment and subsequently reduce price pressures. Our results suggest that pandemic fiscal support for temporary closures may have eased inflationary pressures.

Econstor (Econstor)
Princeton University (US), Bank of England (GB), Bank of Canada (CA)
Decent work and economic growth
Openalex Percentile: Top 51%
Classical Studies and Legal History
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