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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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Cited by:
  1. Adolfo Barajas & Mario Catalán, 2011. "Market Discipline and Conflicts of Interest Between Banks and Pension Funds," IMF Working Papers, International Monetary Fund 11/282, International Monetary Fund.
  2. 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.
  3. repec:hal:wpaper:halshs-00703738 is not listed on IDEAS
  4. Gerlach-Kristen, Petra & O'Connell, Brian & O'Toole, Conor, 2013. "How do banking crises affect aggregate consumption? Evidence from international crisis episodes," Papers, Economic and Social Research Institute (ESRI) WP464, Economic and Social Research Institute (ESRI).
  5. Michael Brei & Carlos Winograd, 2012. "Foreign banks, corporate strategy and financial stability: lessons from the river plate," PSE Working Papers, HAL halshs-00703738, HAL.
  6. 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, Elsevier, vol. 28(7), pages 1182-1203, November.

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