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Did the Basel Accord Cause a Credit Slowdown in Latin America?

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  • Adolfo Barajas

    ()

  • Ralph Chami

    ()

  • Thomas Cosimano

Abstract

Drawing from a unique data set comprising 2,893 banks and 152 countries over the period 1987 to 2000, we test whether the adoption of the Basel Accord by Latin American and Caribbean countries was responsible for the serious slowdowns in credit growth experienced by these countries. We find that, on average, both bank capitalization and lending activities in Latin America increased after Basel. Consequently, Basel did not seem to lead to an overall credit decline. However, we do find evidence that loan growth became more sensitive to some risk factors. Our study suggests that the upcoming adoption of Basel II might cause greater procyclicality of credit.

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Bibliographic Info

Article provided by LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION in its journal JOURNAL OF LACEA ECONOMIA.

Volume (Year): (2004)
Issue (Month): ()
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Handle: RePEc:col:000425:008668

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Keywords: Capital Requirements; Basel Accord; Capital Channel;

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Citations

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Cited by:
  1. Burton A. Abrams & Russell F. Settle, 2007. "Do Fixed Exchange Rates Fetter Monetary Policy? A Credit View," Eastern Economic Journal, Eastern Economic Association, Eastern Economic Association, vol. 33(2), pages 193-205, Spring.
  2. Alicia García-Herrero & Sergio Gavilá, 2006. "Posible impacto de Basilea II en los países emergentes," Banco de Espa�a Occasional Papers, Banco de Espa�a 0606, Banco de Espa�a.
  3. Ralph Chami & Thomas F. Cosimano, 2001. "Monetary Policy with a touch of Basel," IMF Working Papers, International Monetary Fund 01/151, International Monetary Fund.
  4. Birgit Schmitz, 2007. "The impact of Basel I capital regulation on bank deposits and loans: Empirical evidence for Europe," Money Macro and Finance (MMF) Research Group Conference 2006, Money Macro and Finance Research Group 42, Money Macro and Finance Research Group.
  5. Ghosh, Saibal, 2010. "Credit Growth, Bank Soundness and Financial Fragility: Evidence from Indian Banking Sector," MPRA Paper 24715, University Library of Munich, Germany.
  6. Torsten Wezel & Mario Mansilla & Gustavo Adler, 2009. "Modernizing Bank Regulation in Support of Financial Deepening," IMF Working Papers, International Monetary Fund 09/199, International Monetary Fund.

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