Whatever It Takes: The Real Effects of Unconventional Monetary Policy

By V. Acharya, Tim Eisert, Christian Eufinger, Christian W. Hirsch. The Review of financial studies, 2019

567 citations recorded by the source corpus.

Launched in Summer 2012, the European Central Bank’s (ECB) Outright Monetary Transactions (OMT) program indirectly recapitalized European banks through its positive impact on periphery sovereign bonds. However, the stability reestablished in the banking sector did not fully translate into economic growth. We document zombie lending by banks that remained weakly capitalized even post-OMT. In turn, firms receiving loans used these funds not to undertake real economic activity, such as employment and investment, but to build cash reserves. Creditworthy firms in industries with a high zombie firm prevalence significantly suffered from this credit misallocation, which further slowed the economic recovery. Received March 21, 2018; editorial decision November 13, 2018 by Editor Philip Strahan. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Subfields: Finance, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/eb1920681d424ed51e940bdbcf71ef0d39a46af0

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Citations in the corpus

Breaking the Shackles: Zombie Firms, Weak Banks and Depressed Restructuring in Europe (2017, unknown): “In this regard, Acharya et al. (2017) provide some evidence that undercapitalized banks in Europe have directed loans to zombie firms in order to avoid incurring losses on their loan portfolios, which – instead of raising real activity – crowded-out the growth of non-zombie firms via zombie congesti”
A capital structure channel of monetary policy (2018, unknown): “[Table 6 here] Next, we report the effects for private relative to public firms as private firms might be more financially constrained (Acharya et al., 2017).”
The walking dead? Zombie firms and productivity performance in OECD countries (2018, background): “A very recent paper by Acharya et al. (2016) has looked at zombie firms in a number of European periphery countries, but their sample size is limited compared to ours, since they specifically look at firmbank relationships.”
Corporate Zombies: Anatomy and Life Cycle (2020, methodology): “Adalet McGowan et al. (2018) have documented that the number of zombie firms has increased significantly across the advanced economies in the wake of the Great Financial Crisis (GFC), while Banerjee and Hofmann (2018) document a longer-lasting trend increase since the 1980s.”
Credit Misallocation During the European Financial Crisis (2017, unknown): “Acharya et al. (2016) use syndicated loan data to study banks behavior after the “whatever it takes” announcement by Mario Draghi.”
The Rise of Zombie Firms: Causes and Consequences (2018, background): “…owing to unconventional policy measures lowering nominal bond yields (specifically the ECB’s Outright Monetary Transactions (OMT) programme) appear to have increased their supply of loans mainly to low-quality firms with which they had pre-existing lending relationships (Acharya et al (2018)).”