The proliferation of zombie firms is a real problem

Recessions generally give rise to a proliferation of zombie firms in OECD countries. Research on zombie firms (1) shows that: Lending to such firms is excessive and they therefore give rise to excess production capacity; As a result, they lead to a widespread fall in profit margins and inflation; The proliferation of such firms prevents defaults, but also prevents new companies from entering the markets (since they push down profit margins); They lead to a slowdown in productivity and potential growth. V. Acharya, M. Crosignani, T. Eisert, Ch. Eufinger (2020) "Zombie Credit and (Dis-) Inflation: Evidence from Europe” CEPR Discussion Paper No. 14960, June 2020