COVID-19 and the Credit Cycle: 2020 Revisited and 2021 Outlook

16 Pages Posted: 23 Aug 2021

See all articles by Edward I. Altman

Edward I. Altman

New York University (NYU) - Salomon Center; New York University (NYU) - Department of Finance

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Date Written: August 19, 2021


This study continues the author’s examination and forecasts as to the impact of Covid-19 on the U.S. credit cycle after one and a half years since the pandemic first began. We explore the enormous build-up of global debt even before the pandemic commenced and the subsequent record debt expansion through mid-2021. New debt peaks, especially for non-financial corporate debt, is analyzed as to its potential impact on future default rates and the implications for the U.S. credit markets once again starting a new benign cycle in a continuing low interest rate environment. We ask the question whether the spectacular success of the U.S. central bank and its monetary policy and secondary market purchases has also promoted potentially destructive unforeseen consequences for debt rated BBB and below. Large versus small firm defaults and bankruptcies are examined in both 2020 and 2021, as well as our expectations about these firms’ solvency status once the government and central bank supports diminish and are eliminated. Finally, we introduce the concept of global zombie firms and suggest that this growing phenomenon be analyzed more robustly and critically with new criteria and empirical analysis.

Keywords: defaults, credit markets, leverage, Covid-19, zombies

JEL Classification: G01, G33, G32

Suggested Citation

Altman, Edward I., COVID-19 and the Credit Cycle: 2020 Revisited and 2021 Outlook (August 19, 2021). Available at SSRN: or

Edward I. Altman (Contact Author)

New York University (NYU) - Salomon Center ( email )

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New York University (NYU) - Department of Finance ( email )

Stern School of Business
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New York, NY 10012-1126
United States

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