Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/158505
Authors: 
Acharya, Viral
Eisert, Tim
Eufinger, Christian
Hirsch, Christian
Year of Publication: 
2017
Series/Report no.: 
SAFE Working Paper Series 152
Abstract: 
Launched in Summer 2012, the European Central Bank (ECB)'s 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 undercapitalized 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 up cash reserves. Creditworthy firms in industries with a high zombie firm prevalence suffered significantly from this credit misallocation, which further slowed down the economic recovery.
Subjects: 
Unconventional Monetary Policy
Real Effects
Zombie Lending
Document Type: 
Working Paper

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