Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/249773 
Year of Publication: 
2022
Citation: 
[Journal:] RBI Bulletin [ISSN:] 004-5512 [Volume:] 76 [Issue:] 2 [Publisher:] Reserve Bank of India [Place:] Mumbai [Year:] 2022 [Pages:] 53-66
Publisher: 
Reserve Bank of India, Mumbai
Abstract: 
The Schumpeterian creative destruction process requires a dynamic reallocation of resources from weak and vulnerable firms to strong firms having high growth potential. Zombie firms that often survive longer than desirable taking advantage of countercyclical policy support, however, tend to thwart that process. Using firm-level data for India this article finds that monetary policy does not hinder the creative destruction process by misallocating credit flows to zombies during periods of economic slowdown, but zombies seem to have dampened the effectiveness of monetary policy at the margin as they use borrowed resources more for their survival than for undertaking new investment.
Subjects: 
Zombie firms in India
monetary policy
bank credit
investment
JEL: 
E51
E52
D25
R42
Document Type: 
Article
Document Version: 
Published Version
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