IMF Working Paper-Determinants of Zombie Banks in Emerging Markets and Developing Economies

February 23, 2024-Summary:
While deeply undercapitalized banks have been shown to misallocate credit to weak firms, the drivers of such zombie banks are less researched, particularly across countries. To furnish empirical evidence, we compile a dataset of undercapitalized banks from emerging markets and developing economies.

We classify zombie banks as those not receiving remedial treatment by owners or regulators or, alternatively, remaining chronically undercapitalized. Using logit regressions, we find that country-specific factors are more influential for zombie status than bank characteristics, alhough some become significant when disaggreating by region. The paper's overall findings imply the need for a proper regulatory framework and an effective resolution regime to deal with zombie banks more decisively.

Bybit & Block Scholes Report: Market Sentiment Shows Early Signs of Recovery

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All three are interconnected.
Bubbles tend to cause serious short-term pain when they burst-but they can also fundamentally reshape economies with lasting benefits.
It's not exactly reassuring when so many people start scanning the past for a read on what's happening in the present.