Banks might prolong loans to weaker customers to avoid the realisation of losses. Less funding might therefore be available for new and more productive firms. Such a mechanism would be visible in corporate insolvencies and job flows, as fewer firms would exit the market. The available data for Germany is rather mixed.
While corporate insolvencies declined, the number of financially weak non-financial firms[7] also fell from around 8% in 2010 to roughly 6% in 2018. While job flows decreased, the job finding rate also increased slightly but steadily in response to labour market reforms. [8] Changes in the competitive structure of markets are a second channel through which low interest rates could have permanent real effects.