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Zombies at large? Corporate debt overhang and the macroeconomy

Oscar Jorda (), Martin Kornejew (), Moritz Schularick and Alan Taylor ()
Additional contact information
Martin Kornejew: Department of Economics, University of Bonn
Moritz Schularick: Federal Reserve Bank of New York; and Department of Economics, University of Bonn; and CEPR

No 42, ECONtribute Discussion Papers Series from University of Bonn and University of Cologne, Germany

Abstract: With business leverage at record levels, the effects of corporate debt overhang on growth and investment have become a prominent concern. In this paper, we study the effects of corporate debt overhang based on long-run cross-country data covering the nearuniverse of modern business cycles. We show that business credit booms typically do not leave a lasting imprint on the macroeconomy. Quantile local projections indicate that business credit booms do not affect the economy’s tail risks either. Yet in line with theory, we find that the economic costs of corporate debt booms rise when inefficient debt restructuring and liquidation impede the resolution of corporate financial distress and make it more likely that corporate zombies creep along.

Keywords: corporate debt; business cycles; local projections (search for similar items in EconPapers)
JEL-codes: E44 G32 G33 N20 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2020-12
New Economics Papers: this item is included in nep-cfn, nep-fdg, nep-his and nep-mac
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Downloads: (external link)
https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_042_2020.pdf First version, 2020 (application/pdf)

Related works:
Working Paper: Zombies at large? Corporate debt overhang and the macroeconomy (2020) Downloads
Working Paper: Zombies at Large? Corporate Debt Overhang and the Macroeconomy (2020) Downloads
Working Paper: Zombies at Large? Corporate Debt Overhang and the Macroeconomy (2020) Downloads
Working Paper: Zombies at Large? Corporate Debt Overhang and the Macroeconomy (2020) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ajk:ajkdps:042

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