Homar, Timotej, Wijnbergen, Sweder van, (2015), “On Zombie Banks and Recessions after Systemic Banking Crises”, Centre for Economic Policy Research, November.
What costs do zombie banks impose on society? We analyze the effects of government and central bank interventions in 68 systemic banking crises since 1980, of which 28 are part of the recent global financial crisis. Our estimation approach controls for the correlation between intervention measures and the time-invariant component of unobservable crisis severity. We find that timely bank recapitalizations substantially reduce the duration of recessions, underscoring the distortions caused by zombie banks and the costs of regulatory forbearance.
Relevant Posts
- Peltonen, Tuomas A., Rancan, Michela, Sarlin, Peter, (2015), “Interconnectedness of the banking sector as a vulnerability to crises”, ECB Working Paper 1866, November.
- Amaglobeli, David, End, Nicolas, Jarmuzek, Mariusz, Palomba, Geremia, (2015), “From Systemic Banking Crises to Fiscal Costs: Risk Factors”, IMF Working Paper/WP/15/166, Fiscal Affairs Department, July.