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Whatever it takes: The Real Effects of Unconventional Monetary Policy

Listed author(s):
  • Acharya, Viral V
  • Eisert, Tim
  • Eufinger, Christian
  • Hirsch, Christian
Registered author(s):

    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.

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    Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 12005.

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    Date of creation: Apr 2017
    Handle: RePEc:cpr:ceprdp:12005
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    4. Matteo Crosignani & Miguel Faria-e-Castro & Luís Fonseca, 2016. "The (unintended?) consequences of the largest liquidity injection ever," ESRB Working Paper Series 31, European Systemic Risk Board.
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    16. Acharya, Viral V & Eisert, Tim & Eufinger, Christian & Hirsch, Christian, 2014. "Real Effects of the Sovereign Debt Crisis in Europe: Evidence from Syndicated Loans," CEPR Discussion Papers 10108, C.E.P.R. Discussion Papers.
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