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- 31 October 2022
- WORKING PAPER SERIES - No. 2743Details
- Since the term was ﬁrst coined in studies on the 1990s Japanese crisis, the concept of zombiﬁcation has been investigated and revived repeatedly when concerns arise about credit misallocation and stagnating productivity growth in an economy. The starting point for these studies nearly always involves trying to identify the so-called ‘zombie’ ﬁrms. This has led in the past years to a proliferation of diﬀerent deﬁnitions and identiﬁcation methodologies. We survey the most prominent deﬁnitions, discussing advantages and limitations of each. We also undertake a comparison of methodologies on a common dataset for euro area ﬁrms from 2004-2019, with the exercise revealing limited overlap and low comparability in the ﬁrms identiﬁed by several prominent studies. In response, we introduce a formalisation of zombie-classiﬁcations which helps to make order in the growing number of variations and identiﬁcation methodologies. Moreover, this formalisation also helps extending the concept of binary identiﬁcation to that of fuzzy zombie-identiﬁcation. In particular, we introduce a general procedure to turn arbitrary binary classiﬁcations into fuzzy ones showing it successfully increases consistency between zombie deﬁnitions.
- JEL Code
- L25 : Industrial Organization→Firm Objectives, Organization, and Behavior→Firm Performance: Size, Diversification, and Scope
D22 : Microeconomics→Production and Organizations→Firm Behavior: Empirical Analysis
D24 : Microeconomics→Production and Organizations→Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity
C55 : Mathematical and Quantitative Methods→Econometric Modeling→Modeling with Large Data Sets?
O40 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→General
- 18 May 2021
- FINANCIAL STABILITY REVIEW - ARTICLEFinancial Stability Review Issue 1, 2021Details
- Policy measures aimed at supporting corporates and the economy through the coronavirus pandemic may have supported not just otherwise viable firms, but also unprofitable but still operating firms – often referred to as “zombies”. This has in turn raised questions about an increased risk of zombification in the euro area economy, which could constrain the post-pandemic recovery. Firm-level, loan-level and supervisory data for euro area companies suggest that zombie firms may have temporarily benefited from loan schemes and accommodative credit conditions – but likely only to a modest degree. These firms may face tighter eligibility criteria for schemes and more recognition of credit risk in debt and loan pricing in the future. Tackling the risk of zombification more fundamentally requires the consideration of suggested reforms to insolvency frameworks and better infrastructure for banks to manage non-performing loans.
- JEL Code
- E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill
G38 : Financial Economics→Corporate Finance and Governance→Government Policy and Regulation
L25 : Industrial Organization→Firm Objectives, Organization, and Behavior→Firm Performance: Size, Diversification, and Scope