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Zombie credit and (dis-)inflation: evidence from Europe

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Bibliographic Details
Authors and Corporations: Acharya, Viral V. (Author), Crosignani, Matteo (Author), Eisert, Tim (Author), Eufinger, Christian (Author)
Other Authors: Crosignani, Matteo [Author] • Eisert, Tim 1985- [Author] • Eufinger, Christian 1982- [Author]
Type of Resource: E-Book
Language: English
published:
Series: Federal Reserve Bank of New York: Staff reports ; no. 955 (December 2020)
Subjects:
zombie lending
undercapitalized banks
disinflation
firm productivity
eurozone
Graue Literatur
Source: Verbunddaten SWB
Lizenzfreie Online-Ressourcen
Description
Summary: We show that "zombie credit" - cheap credit to impaired firms - has a disinflationary effect. By helping distressed firms to stay afloat, such credit creates excess production capacity, thereby putting downward pressure on product prices. Granular European data on inflation, firms, and banks confirm this mechanism. Industry-country pairs affected by a rise of zombie credit show lower firm entry and exit rates, markups, and product prices, as well as a misallocation of capital and labor, which results in lower productivity, investment, and value added. Without a rise in zombie credit, inflation in Europe would have been 0.4 percentage point higher post-2012.
Physical Description: 1 Online-Ressource (circa 77 Seiten); Illustrationen