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Zombies at Large? Corporate Debt Overhang and the Macroeconomy
- samizdis 6y agoThe bottom line, as given an article in today's FT [1]: Using a database across 17 economies going back to the 19th century, Oscar Jordà, Martin Kornejew, Moritz Schularick and Alan Taylor investigated whether big corporate debt build-ups led to deeper and longer recessions, as is historically the case after booms and busts in household or finance industry debts. Their conclusion is counterintuitive. “There is no evidence that corporate debt booms result in deeper declines in investment or output, nor that the economy takes longer to recover than at other times,” the paper says. Nor did the economists find any evidence that big corporate debt overhangs made economies more fragile, and prone to less frequent but bigger downturns. [1] https://www.ft.com/content/168e908a-03a5-4a0c-b993-355e88afee41 https://www.ft.com/content/168e908a-03a5-4a0c-b993-355e88afe...