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Banks During the Argentine Crisis: Were They All Hurt Equally? Did They All Behave Equally?

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  • Adolfo Barajas
  • Emiliano Basco
  • V Hugo Juan-Ram�n
  • Carlos Quarracino

Abstract

The simple answer to both questions in the title of this paper: No. We concentrate on three key aspects of the banking system's difficulties during the 2001–02 crisis. Two are related to bank behavior (increasing dollarization of the balance sheet and expanding exposure to the government), and the other is related to the degree by which banks were hurt by depositor preferences, specifically, the run on deposits during 2001. We find that there was substantial cross-bank variation, that is, not all banks behaved equally nor were hurt equally by the macroeconomic shocks they faced during the run-up to the crisis. Furthermore, using panel data estimation, we find that depositors were able to distinguish high-risk from low-risk banks, and that individual bank's exposure to currency and government default risk depended on fundamentals and other bank-specific characteristics. Finally, our results have implications for the existence of market discipline in periods of stress, and for banking regulation, which may have led banks to underestimate some of the risks they incurred. IMF Staff Papers (2007) 54, 621–662. doi:10.1057/palgrave.imfsp.9450022

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Bibliographic Info

Article provided by Palgrave Macmillan in its journal IMF Staff Papers.

Volume (Year): 54 (2007)
Issue (Month): 4 (November)
Pages: 621-662

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Handle: RePEc:pal:imfstp:v:54:y:2007:i:4:p:621-662

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References

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  1. Gerardo della Paolera & Alan M. Taylor, 2003. "Gaucho banking redux," Pacific Basin Working Paper Series 03-04, Federal Reserve Bank of San Francisco.
  2. Charles W. Calomiris & Andrew Powell, 2000. "Can Emerging Market Bank Regulators Establish Credible Discipline? The Case of Argentina, 1992-1999," NBER Working Papers 7715, National Bureau of Economic Research, Inc.
  3. Adolfo Barajas & Roberto Steiner, 2002. "Why Don't They Lend? Credit Stagnation in Latin America," IMF Staff Papers, Palgrave Macmillan, vol. 49(Special i), pages 156-184.
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Cited by:
  1. Panetta, Fabio & Correa, Ricardo & Davies, Michael & Di Cesare, Antonio & Marques, José-Manuel & Nadal de Simone, Francisco & Signoretti, Federico & Vespro, Cristina & Vildo, Siret & Wieland, Martin , 2011. "The impact of sovereign credit risk on bank funding conditions," MPRA Paper 32581, University Library of Munich, Germany.
  2. Gerlach-Kristen, Petra & O'Connell, Brian & O'Toole, Conor, 2014. "How do banking crises affect aggregate consumption? Evidence from international crisis episodes," Papers WP464, Economic and Social Research Institute (ESRI).
  3. Basco, Emiliano & D'Amato, Laura & Garegnani, Lorena, 2009. "Understanding the money-prices relationship under low and high inflation regimes: Argentina 1977-2006," Journal of International Money and Finance, Elsevier, vol. 28(7), pages 1182-1203, November.
  4. Bjoern Rother & Ivetta Hakobyan & Monica Baumgarten de Bolle, 2006. "The Level and Composition of Public Sector Debt in Emerging Market Crises," IMF Working Papers 06/186, International Monetary Fund.
  5. Michael Brei & Carlos Winograd, 2012. "Foreign banks, corporate strategy and financial stability: lessons from the river plate," PSE Working Papers halshs-00703738, HAL.
  6. Adolfo Barajas & Mario Catalán, 2011. "Market Discipline and Conflicts of Interest between Banks and Pension Funds," IMF Working Papers 11/282, International Monetary Fund.
  7. Michael Brei & Carlos Winograd, 2012. "Foreign banks, corporate strategy and financial stability: lessons from the river plate," Working Papers halshs-00703738, HAL.

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