Liquidity Reserves of Danish Firms: implications during the COVID-19 epidemic

Economic Memo – June 2020 – No. 2

Authors Renkin, Tobias (Danmarks Nationalbank)
Subject Other economic analyses
Type Economic Memo
Year 2020
Published 4 June 2020
We analyse the distribution of internal liquidity reserves among Danish firms during normal times. The median firm has reserves covering about one month of "fixed capacity cost". About a third of firms have reserves close to zero. We show that cost and wage compensation schemes, as implemented in Denmark during the current coronavirus epidemic, substantially extend the duration of liquidity reserves for firms with some reserves. Firms with very low reserves have to rely on external sources of liquidity.