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Emirates Business: Low interest rates might be what is hurting growth
27 March 2019
Meanwhile, a very interesting new paper by economists Philippe Aghion, Antonin Bergeaud, Gilbert Cette, Remy Lecat and Helene Maghin looks at the relationship between credit constraints and productivity at the level of industrial sectors and individual companies, using French data. They find a U-shaped relationship at the sectoral level - at first, more lending is correlated with rising productivity, but as credit becomes very loose, productivity tends to fall. Unproductive companies with easy access to credit tend not to exit the market - a clear mechanism by which low rates might create zombies.