The Liquidity Sprint: Short‐Term Cash Needs and Access to Credit

We identify the causal drivers of the COVID‐19 ‘dash‐for‐cash’ in Europe using a hand‐collected panel of Euro‐area firms (2018‐Q4–2020‐Q3). Exploiting regional infection intensity as an instrument, we find that a one‐unit EBITDA decline raised credit‐line utilization by 15.5 percentage points in 2020‐Q2. Unlike the US ‘fallen‐angel’ narrative, the European surge was led by financially unconstrained firms and driven by operational disruptions rather than financial stress. Mediated by work‐from‐home constraints and lockdown stringency, banks accommodated demand via policy backstops. Our results highlight a novel operational channel distinct from previous financial crises.