Whatever it takes: the real effects of unconventional monetary policy

  • The ECB’s Outright Monetary Transactions (OMT) program, launched in summer 2012, indirectly recapitalized periphery country banks through its positive impact on the value of sovereign bonds. However, the regained stability of the European banking sector has not fully transferred into economic growth. We show that zombie lending behavior of banks that still remained undercapitalized after the OMT announcement is an important reason for this development. As a result, there was no positive impact on real economic activity like employment or investment. Instead, firms mainly used the newly acquired funds to build up cash reserves. Finally, we document that creditworthy firms in industries with a high prevalence of zombie firms suffered significantly from the credit misallocation, which slowed down the economic recovery.

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Author:Viral V. Acharya, Tim Eisert, Christian Eufinger, Christian W. HirschGND
Parent Title (English):SAFE working paper series ; No. 152
Series (Serial Number):SAFE working paper (152)
Place of publication:Frankfurt am Main
Document Type:Working Paper
Year of Completion:2016
Year of first Publication:2016
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2016/11/01
Tag:Real Effects; Unconventional Monetary Policy; Zombie Lending
Page Number:69
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
3 Sozialwissenschaften / 34 Recht / 340 Recht
Licence (German):License LogoDeutsches Urheberrecht