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Demand and Supply Shocks : Evidence from Corporate Earning Calls (English)

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.

Details

  • Author

    Ruch,Franz Ulrich, Taskin,Temel

  • Document Date

    2022/02/01

  • Document Type

    Policy Research Working Paper

  • Report Number

    WPS9922

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    World,

  • Region

    The World Region,

  • Disclosure Date

    2022/02/01

  • Disclosure Status

    Disclosed

  • Doc Name

    Demand and Supply Shocks : Evidence from Corporate Earning Calls

  • Keywords

    supply shock; center for economic policy; Equitable Growth, Finance and Institutions; demand shock; nominal effective exchange rate; Information Technology and Communication; inflation; central bank policy; equity market capitalization; global value chain; fiscal policy response; negative supply shock; positive demand shock; decline in inflation; real gdp; standard deviation; consumer price inflation; consumer price index; global supply chain; real economic activity; behavior of firms; stock market behavior; natural language processing; change in volatility; emerging market economy; misallocation of capital; journal of finance; west texas intermediate; real business cycle; risk of infection; deviation of growth; increase in inflation; international trade flows; decomposition of growth; reduction in consumption; IS Building; nominal exchange rate; port of call; monetary policy; aggregate demand; consumer inflation; impulse response; business service; oil price; economic shock; department stores; airport service; global demand; financial crisis; word list; trade sector; macroeconomic model; textual analysis; Energy Sector; correlation coefficient; consumer demand; inflation movement; advanced economy; supply disruption; Macroeconomic Policy; positive shock; automotive sector; aggregate supply; global recession; indicator function; sectoral impacts; data center; Exchange Rates; macroeconomic data; output growth; business model; indirect impact; endogenous variable; time t; identification assumptions; empirical macroeconomics; shock variable; adverse demand; annual output; market environment; energy input; lagged dependent; lag length; empirical analysis; airline sector; accurate count; time sery; virus outbreak; recovery period; supply condition; travel restriction; other sectors; employment arrangements; manufacturing sector; epidemic disease; political risk; aggregate fluctuation; mortgage credit; mortgage default; Work Remotely; capital risk; investment behaviour; oecd countries; open economy; macroeconomic impact; vehicle demand; global impact; test vehicles; fleet operation; market factor; several days; technology platform; financial impact; future demand; cruise industry; cruise ship; demand indicator; macroeconomic condition; Global Operations; market demand; annual revenue; log change; output volatility; debt crisis; benchmark value; sample period; value added; output loss; model result; mitigation measure; unemployment benefit; output collapse; data coverage; weighted average; retail grocery; direct accounting; price adjustment; macroeconomic fluctuation; dynamic effect; investment dynamic; Economic Studies; economic study; keynesian economy; macroeconomic implication; global scale; Research Support; newspaper article; forward linkages; import value; firm level; total employment; macroeconomic stabilization; backward linkages; political uncertainty; quantitative analysis; in economics; vector autoregression; corporate sector; automobile sector; relative magnitude; retail trade; lower inflation; descriptive statistic; cyclical conditions; machine learning; targeted intervention; firm exit; Financial Stability; robustness check; Fiscal policies; economic recovery; labor supply; price setting; open access; development policy

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Citation

Ruch,Franz Ulrich Taskin,Temel

Demand and Supply Shocks : Evidence from Corporate Earning Calls (English). Policy Research working paper,no. WPS 9922,COVID-19 (Coronavirus) Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/299521643742060995/Demand-and-Supply-Shocks-Evidence-from-Corporate-Earning-Calls