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Whatever It Takes: The Real Effects of Unconventional Monetary Policy

SAFE Working Paper No. 152

Posted: 25 Oct 2016 Last revised: 8 May 2017

Viral V. Acharya

New York University - Leonard N. Stern School of Business; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); New York University (NYU) - Department of Finance

Tim Eisert

Erasmus University Rotterdam (EUR)

Christian Eufinger

IESE Business School

Christian W. Hirsch

University of Frankfurt; Goethe University Frankfurt - Research Center SAFE

Multiple version iconThere are 3 versions of this paper

Date Written: April 11, 2017

Abstract

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.

Keywords: Unconventional Monetary Policy, Real Effects, Zombie Lending

Suggested Citation

Acharya, Viral V. and Eisert, Tim and Eufinger, Christian and Hirsch, Christian W., Whatever It Takes: The Real Effects of Unconventional Monetary Policy (April 11, 2017). SAFE Working Paper No. 152. Available at SSRN: https://ssrn.com/abstract=2858147

Viral V. Acharya (Contact Author)

New York University - Leonard N. Stern School of Business ( email )

44 West 4th Street
New York, NY NY 10012
United States

HOME PAGE: http://pages.stern.nyu.edu/~sternfin/vacharya/public_html/~vacharya.htm

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

New York University (NYU) - Department of Finance

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

Tim Eisert

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Christian Eufinger

IESE Business School ( email )

Avinguda de Pearson, 21
Barcelona, 08034
Spain

Christian W. Hirsch

University of Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany
+49 69 798 33704 (Phone)
+49 69 798 33901 (Fax)

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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