Corporate indebtedness and macroeconomic stabilisation from a long-term perspective

Moritz Schularick

No 24, ECONtribute Policy Brief Series from University of Bonn and University of Cologne, Germany

Abstract: Corporate debt levels have risen sharply in advanced and emerging economies before and during the Covid pandemic. Will corporate debt overhang slow down the recovery from the pandemic? This paper studies the aftermath of corporate debt surges in long-run cross country data. History shows that the macro-economic aftermath of corporate debt booms is typically benign. Three caveats apply, but none of them currently raises alarm bells: (i) the sectoral composition of corporate debt must not be tilted towards investments in the non-tradable sectors; (ii) legal institutions for debt reorganization must work efficiently; (iii) in bank-based financial systems, stringent banking supervision must prevent the emergence or survival of zombie companies.

Pages: 28 pages
Date: 2021-09
New Economics Papers: this item is included in nep-cfn, nep-fdg and nep-his
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.econtribute.de/RePEc/ajk/ajkpbs/ECONtribute_PB_024_2021.pdf First version, 2021 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ajk:ajkpbs:024

Access Statistics for this paper

More papers in ECONtribute Policy Brief Series from University of Bonn and University of Cologne, Germany Niebuhrstrasse 5, 53113 Bonn, Germany.
Bibliographic data for series maintained by ECONtribute Office ().