Acharya, Viral V.; Crosignani, Matteo; Eisert, Tim; … - 2020
We show that "zombie credit" - cheap credit to impaired firms - has a disinflationary effect. By helping distressed … firms to stay afloat, such credit creates excess production capacity, thereby putting downward pressure on product prices … zombie credit show lower firm entry and exit rates, markups, and product prices, as well as a misallocation of capital and …