Covid-19 support may have created “zombie firms” – BIS economists
Policy-makers should impose tighter lending standards and reform bankruptcy law, analysts argue
Looser monetary policy introduced as a response to the Covid-19 pandemic may be keeping “zombie firms” alive, two Bank for International Settlements economists warn.
Speaking on a BIS podcast on April 13, economists Boris Hoffman and Ryan Banerjee said that low interest rates mean that unprofitable firms can tap cheap credit, which helps them to avoid bankruptcies. Economists define “zombie firms” as firms that are persistently unprofitable and which the market judges unlikely to return to
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