On Zombie Banks and Recessions after Systemic Banking Crises

62 Pages Posted: 1 Dec 2015

See all articles by Timotej Homar

Timotej Homar

University of Amsterdam; Tinbergen Institute

Sweder van Wijnbergen

Universiteit van Amsterdam; Tinbergen Institute; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: November 2015

Abstract

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.

Keywords: bank recapitalization, economic recovery, financial crises, intervention, regulatory forbearance, zombie banks

JEL Classification: E44, E58, G21, G28

Suggested Citation

Homar, Timotej and van Wijnbergen, Sweder, On Zombie Banks and Recessions after Systemic Banking Crises (November 2015). CEPR Discussion Paper No. DP10963. Available at SSRN: https://ssrn.com/abstract=2697596

Timotej Homar (Contact Author)

University of Amsterdam ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Sweder Van Wijnbergen

Universiteit van Amsterdam ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 4011 / 4203 (Phone)
+31-35-624 91 82 (Fax)

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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