scholarly journals Zombies at Large? Corporate Debt Overhang and the Macroeconomy

2021 ◽  
Author(s):  
Òscar Jordà ◽  
◽  
Martin Kornejew ◽  
Moritz Schularick ◽  
Alan Taylor ◽  
...  
Keyword(s):  
Corporate Bonds ◽  
Bank Loans ◽  
Corporate Debt ◽  
Legal Tradition ◽  
Debt Overhang ◽  
Credit Booms ◽  
Debt Renegotiation ◽  
The Past ◽  
Advanced Economies ◽  
Household Credit

What are the macroeconomic consequences of business credit booms? Are they as dangerous as household credit booms? If not, why not? We answer these questions by collecting data on nonfinancial business liabilities (primarily bank loans and corporate bonds) for 17 advanced economies over the past 150 years. Unlike household credit, business credit booms are rarely followed by macroeconomic hangovers. Data on debt renegotiation costs—instrumented by a country’s legal tradition—show that frictions to debt resolution make recessions deeper and longer—an important factor in explaining the differences with household credit booms.

scholarly journals Zombies at Large? Corporate Debt Overhang and the Macroeconomy

2020 ◽  
pp. 1.000-46.000
Author(s):  
Òscar Jordà ◽  
◽  
Martin Kornejew ◽  
Moritz Schularick ◽  
Alan M. Taylor ◽  
...  
Keyword(s):  
Business Cycles ◽  
Financial Distress ◽  
Corporate Debt ◽  
Economic Costs ◽  
Debt Overhang ◽  
Credit Booms ◽  
Long Run ◽  
Modern Business ◽  
Cross Country ◽  
Local Projections

With business leverage at record levels, the effects of corporate debt overhang on growth and investment have become a prominent concern. In this paper, we study the effects of corporate debt overhang based on long-run cross-country data covering the near universe modern business cycles. We show that business credit booms typically do not leave a lasting imprint on the macroeconomy. Quantile local projections indicate that business credit booms do not affect the economy’s tail risks either. Yet in line with theory, we find that the economic costs of corporate debt booms rise when inefficient debt restructuring and liquidation impede the resolution of corporate financial distress and make it more likely that corporate zombies creep along.

FDI, Industrialization, and Development

2017 ◽  
Author(s):  
Yilmaz Akyüz
Keyword(s):  
Industrial Policy ◽  
Transnational Corporations ◽  
Competitive Advantages ◽  
Policy Space ◽  
Management Skills ◽  
Host Countries ◽  
Strong Case ◽  
The Past ◽  
Advanced Economies ◽  
International Investors

Superior technology and management skills of transnational corporations (TNCs) can bring significant benefits to EDEs. However, they cannot be expected to pass willingly the competencies that bring them competitive advantages or act with a developmental perspective and help build potentially efficient local industries. Their contribution to industrialization and development depends very much on deliberate policies of host countries. Lessons from experience suggest that successful examples are found not among EDEs that attracted more FDI, but among those which used it effectively in the context of national industrial policy. However, the past two decades have seen a rapid erosion of policy space in EDEs as a result of bilateral investment treaties signed with more advanced economies, allowing significant leverage to international investors. There is a strong case for renegotiating or terminating them since they greatly compromise the ability of EDEs to benefit from FDI for industrialization and development.

Corporate Debt Overhang and Credit Policy

2020 ◽  
Vol 2020 (2) ◽  
pp. 447-502
Author(s):  
Markus Brunnermeier ◽  
Arvind Krishnamurthy
Keyword(s):  
Corporate Debt ◽  
Credit Policy ◽  
Debt Overhang

scholarly journals What Remains of Cross-Country Convergence?

2020 ◽  
Vol 58 (1) ◽  
pp. 129-175 ◽  
Author(s):  
Paul Johnson ◽  
Chris Papageorgiou
Keyword(s):  
Developing Countries ◽  
Absolute Convergence ◽  
Recent Literature ◽  
Global Inequality ◽  
Income Gap ◽  
The Past ◽  
Advanced Economies ◽  
Per Capita ◽  
Cross Country ◽  
Distribution Of Income

We examine the record of cross-country growth over the past fifty years and ask if developing countries have made progress on closing the income gap between their per capita incomes and those in the advanced economies. We conclude that, as a group, they have not and then survey the literature on absolute convergence with particular emphasis on that from the last decade or so. That literature supports our conclusion of a lack of progress in closing the income gap between countries. We close with a brief examination of the recent literature on cross-individual distribution of income, which finds that despite the lack of progress on cross country convergence, global inequality has tended to fall since 2000. ( JEL E01, E13, O11, O47, F41, F62)

scholarly journals Credit booms, debt overhang and secular stagnation

2018 ◽  
Vol 108 ◽  
pp. 78-104 ◽  
Author(s):  
Gerhard Illing ◽  
Yoshiyasu Ono ◽  
Matthias Schlegl
Keyword(s):  
Secular Stagnation ◽  
Debt Overhang ◽  
Credit Booms

scholarly journals Job protection deregulation in good and bad times

2019 ◽  
Author(s):  
Romain Duval ◽  
Davide Furceri ◽  
Joao Jalles
Keyword(s):  
Business Cycle ◽  
Projection Method ◽  
The State ◽  
Employment Effect ◽  
Short Term ◽  
Local Projection ◽  
The Past ◽  
Level Data ◽  
Advanced Economies ◽  
State Of The Economy

Abstract This paper explores the short-term employment effect of deregulating job protection for regular workers and how it varies with prevailing business cycle conditions. We apply the local projection method to a newly constructed dataset of major regular job protection reforms covering 26 advanced economies over the past four decades. The analysis relies on country-sector-level data, using as identifying assumption the fact that stringent dismissal regulations are more binding in sectors that are characterized by a higher ‘natural’ propensity to make regular adjustments to the workforce. We find that the response of sectoral employment to deregulation depends crucially on the state of the economy at the time of reform—deregulation increases employment if implemented during an economic expansion, but reduces employment if carried out in a recession. These findings are consistent with theory and are robust to a battery of sensitivity checks.

Macro-Fiscal Implications of Health Care Reform in Advanced and Emerging Economies

Policy Papers ◽  
2010 ◽  
Vol 2010 (113) ◽  
Author(s):  
Keyword(s):  
Public Health ◽  
Health Care ◽  
Emerging Economies ◽  
Health Spending ◽  
Public Health Spending ◽  
The Past ◽  
Advanced Economies ◽  
Analytical Approaches ◽  
Fiscal Implications ◽  
Specific Health

This paper provides an analysis of the developments in public health spending over the past 40 years, as well as projections of public health spending for 50 advanced and emerging countries over 2011–50. The paper also quantifies the effects of specific health reforms on the growth of public health spending in advanced economies by drawing on a range of analytical approaches, including country case studies. The challenges facing emerging economies as they seek to expand coverage of health care in a fiscally sustainable manner are also examined

Effects of Tight Money Policy on the Availability of Bank Loans to Small Businesses

1979 ◽  
Vol 4 (1) ◽  
pp. 22-30 ◽  
Author(s):  
C. F. Charles
Keyword(s):  
Time Series ◽  
Time Series Analysis ◽  
Small Businesses ◽  
Commercial Banks ◽  
Statistical Investigation ◽  
Bank Loans ◽  
The Past ◽  
Series Analysis ◽  
Financial Conditions ◽  
Small Manufacturers

Despite efforts in the past, the issue of whether tight money policy unfairly discriminates against small businesses remains an unsettled debate. More statistical investigation of the issue seems to offer the only answer to resolve the issue. This paper presents results from a statistical investigation of the financial conditions of small manufacturing corporations. The time-series analysis covering three cycles and one minor slump during '66–67 reveals that commercial banks did drastically reduce the volume of loans to small manufacturers during tight money periods when large corporations demanded more accommodation from banks.

Book Reviews

2017 ◽  
Vol 55 (2) ◽  
pp. 662-663
Keyword(s):  
Middle Ages ◽  
Common Law ◽  
Civil Law ◽  
Legal Tradition ◽  
Bretton Woods ◽  
The Past ◽  
History Of ◽  
Lewis And Clark ◽  
The Middle Ages

Eric Tymoigne of Lewis and Clark College reviews “Money in the Western Legal Tradition: Middle Ages to Bretton Woods,” edited by David Fox and Wolfgang Ernst. The Econlit abstract for this book begins: “Thirty-three papers, most previously presented at conferences held in Cambridge in 2011 and 2012 and supported by the Gerda Henkel Stiftung, provide a history of some of the main topics in the monetary law of the civil law and common law systems at different stages of its development over the past eight hundred years, from the Middle Ages until the Bretton Woods agreements of 1944.”

Sticky Leverage

2016 ◽  
Vol 106 (12) ◽  
pp. 3800-3828 ◽  
Author(s):  
João Gomes ◽  
Urban Jermann ◽  
Lukas Schmid
Keyword(s):  
Interest Rate ◽  
General Equilibrium ◽  
Equilibrium Model ◽  
Debt Maturity ◽  
General Equilibrium Model ◽  
Corporate Debt ◽  
Debt Overhang ◽  
The Real ◽  
Unanticipated Inflation

We develop a tractable general equilibrium model that captures the interplay between nominal long-term corporate debt, inflation, and real aggregates. We show that unanticipated inflation changes the real burden of debt and, more significantly, leads to a debt overhang that distorts future investment and production decisions. For these effects to be both large and very persistent, it is essential that debt maturity exceeds one period. We also show that interest rate rules can help stabilize our economy. (JEL E12, E31, E44, E52, G01, G32, G35)

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