A model to assess the financial vulnerability of Italian firms

We develop a model to assess the financial vulnerability of the Italian corporate sector over a two-year horizon under baseline and stressed scenarios. To take into account the heterogeneity of firms and their demography we use micro data, which are then integrated with macroeconomic forecasts. We find that an accommodative monetary policy combined with economic recovery and pro-growth reforms widely reduce the vulnerability of the corporate sector. However, micro firms and those operating in the construction sector remain the most vulnerable, suggesting that targeted policies would be beneficial.