Zombie Credit and (Dis-)Inflation: Evidence from Europe

Viral Acharya, Matteo Crosignani, Tim Eisert and Christian Eufinger

No 27158, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We show that cheap credit to impaired firms has a disinflationary effect. By helping distressed firms to stay afloat, “zombie credit” can create excess production capacity, and in turn, put downward pressure on markups and prices. We test this mechanism exploiting granular inflation and firm-level data from twelve European countries. In the cross-section of industries and countries, we find that a rise of zombie credit is associated with a decrease in firm defaults and entries, firm markups and product prices; lower productivity; and, an increase in aggregate sales as well as material and labor cost. These results hold at the firm-level, where we document spillover effects to healthy firms in markets with high zombie credit. Our partial equilibrium estimates suggest that without a rise in zombie credit post 2012, annual inflation in Europe during 2012-2016 would have been 0.45 percentage points higher.

JEL-codes: E31 E44 G21 (search for similar items in EconPapers)
Date: 2020-05
New Economics Papers: this item is included in nep-bec and nep-mac
Note: AP CF EFG ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (52)

Published as VIRAL V. ACHARYA & MATTEO CROSIGNANI & TIM EISERT & CHRISTIAN EUFINGER, 2024. "Zombie Credit and (Dis‐)Inflation: Evidence from Europe," The Journal of Finance, vol 79(3), pages 1883-1929.

Downloads: (external link)
http://www.nber.org/papers/w27158.pdf (application/pdf)

Related works:
Journal Article: Zombie Credit and (Dis‐)Inflation: Evidence from Europe (2024)
Working Paper: Zombie Credit and (Dis-)Inflation: Evidence from Europe (2020)
Working Paper: Zombie Credit and (Dis-)Inflation: Evidence from Europe (2020)
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:nbr:nberwo:27158

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w27158

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().