Zombies at large? Corporate debt overhang and the macroeconomy

Moritz Schularick, Oscar Jorda, Martin Kornejew and Alan Taylor

No 15518, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 near universe 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)
Date: 2020-12
New Economics Papers: this item is included in nep-cfn and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Related works:
Journal Article: Zombies at Large? Corporate Debt Overhang and the Macroeconomy (2022)
Working Paper: Zombies at Large? Corporate Debt Overhang and the Macroeconomy (2022)
Working Paper: Zombies at Large? Corporate Debt Overhang and the Macroeconomy (2022)
Working Paper: Zombies at Large? Corporate Debt Overhang and the Macroeconomy (2021)
Working Paper: Zombies at large? Corporate debt overhang and the macroeconomy (2020)
Working Paper: Zombies at Large? Corporate Debt Overhang and the Macroeconomy (2020)
Working Paper: Zombies at Large? Corporate Debt Overhang and the Macroeconomy (2020)
Working Paper: Zombies at Large? Corporate Debt Overhang and the Macroeconomy (2020)
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