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The Financial Impact of the IDB’s Liquidity Program for Growth Sustainability

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  • Ricardo N. Bebczuk

Abstract

This paper assesses the impact of the Liquidity Program for Growth Sustainability (LPGS) on Latin America and the Caribbean, instrumented by the IDB to confront the regional spillovers of the subprime crisis. This emergency liquidity line was set up to boost productive loans of commercial banks, channeled through a second-tier scheme. The empirical strategy revolves around GARCH models to test whether the public announcement of negotiations and of loan approval have had any impact on high frequency macroeconomic data, such as the country risk premium and the interbank interest rate. Our evidence reveals a positive and significant effect on financial stability attributable to LPGS in Jamaica, El Salvador, Costa Rica, Dominican Republic and Panama. We additionally discuss the rationale of key LPGS’ design features and the observed outcomes.

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File URL: http://www.depeco.econo.unlp.edu.ar/doctrab/doc79.pdf
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Bibliographic Info

Paper provided by Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata in its series Department of Economics, Working Papers with number 079.

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Length: 46 pages
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:lap:wpaper:079

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  1. Eduardo Fernandez-Arias & Andrew Powell & Alessandro Rebucci, 2009. "The Multilateral Response to the Global Crisis: Rationale, Modalities, and Feasibility," Research Department Publications, Inter-American Development Bank, Research Department 4629, Inter-American Development Bank, Research Department.
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