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Was the Argentine “corralito” an efficient measure?: a note

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  • Samartín Sáenz, Margarita
  • Cardone Riportella, Clara
  • Bustamante, Rodrigo
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    Abstract

    Theoretical banking literature has largely explored the role of financial intermediaries in the economy, market failures (banking panics) in the banking sector and the need for bank regulation. However, most models of banking panics and regulation have not been empirically tested. The Argentine 2001 crisis, with a large deposit withdrawal and the regulation introduced (suspension of convertibility) constitutes a scenario in order to apply some of the theoretical predictions. In particular, the paper applies Samartín [Samartín, M. (2002). Suspension of convertibility vesus deposit insurance: A welfare comparison. European Finance Review, 6(2), 223–244] to the particular case of Argentina. After the estimation of the most important parameters, the model predicts that suspension of convertibility seems to have been the most efficient intervention measure to stop the massive deposit withdrawals.

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    File URL: http://e-archivo.uc3m.es/bitstream/10016/7175/1/corralito_cardone_REF_2007_ps.pdf
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    Bibliographic Info

    Paper provided by Universidad Carlos III de Madrid in its series Open Access publications from Universidad Carlos III de Madrid with number info:hdl:10016/7175.

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    Length: 455 p.
    Date of creation: 2007
    Date of revision:
    Publication status: Published in International Review of Economics & Finance (2007) v.v. 16, p.444-453
    Handle: RePEc:ner:carlos:info:hdl:10016/7175

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    Web page: http://www.uc3m.es

    Related research

    Keywords: Argentina; Banking panics; Deposit insurance; Suspension of convertibility;

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    1. Yehning Chen, 1999. "Banking Panics: The Role of the First-Come, First-Served Rule and Information Externalities," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 946-968, October.
    2. Franklin Allen & Douglas Gale, 1976. "Optimal Financial Crises," Center for Financial Institutions Working Papers 97-01, Wharton School Center for Financial Institutions, University of Pennsylvania.
    3. Xavier Freixas & Bruno M. Parigi & Jean-Charles Rochet, 2000. "Systemic risk, interbank relations, and liquidity provision by the central bank," Proceedings, Federal Reserve Bank of Cleveland, pages 611-640.
    4. Aghion, Philippe & Bolton, Patrick & Dewatripont, Mathias, 2000. "Contagious bank failures in a free banking system," European Economic Review, Elsevier, vol. 44(4-6), pages 713-718, May.
    5. Krishnamurthy, Arvind, 2000. "Comment on Systemic Risk, Interbank Relations, and Liquidity Provision by the Central Bank," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(3), pages 639-40, August.
    6. Jean Tirole & Jean-Jaques Laffont, 1985. "Using Cost Observation to Regulate Firms," Working papers 368, Massachusetts Institute of Technology (MIT), Department of Economics.
    7. Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 401-19, June.
    8. Jacklin, Charles J & Bhattacharya, Sudipto, 1988. "Distinguishing Panics and Information-Based Bank Runs: Welfare and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 568-92, June.
    9. Chari, V V & Jagannathan, Ravi, 1988. " Banking Panics, Information, and Rational Expectations Equilibrium," Journal of Finance, American Finance Association, vol. 43(3), pages 749-61, July.
    10. Gary Gorton, 1986. "Banking panics and business cycles," Working Papers 86-9, Federal Reserve Bank of Philadelphia.
    11. Williams, Joseph, 1988. " Banking Panics, Information, and Rational Expectations Equilibrium: Discussion," Journal of Finance, American Finance Association, vol. 43(3), pages 761-63, July.
    12. Bryant, John, 1980. "A model of reserves, bank runs, and deposit insurance," Journal of Banking & Finance, Elsevier, vol. 4(4), pages 335-344, December.
    13. Alonso, Irasema, 1996. "On avoiding bank runs," Journal of Monetary Economics, Elsevier, vol. 37(1), pages 73-87, February.
    14. Samartín Sáenz, Margarita, 2002. "Suspension of convertibility versus deposit insurance: a welfare comparison," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/7602, Universidad Carlos III de Madrid.
    15. Calomiris, Charles W & Kahn, Charles M, 1991. "The Role of Demandable Debt in Structuring Optimal Banking Arrangements," American Economic Review, American Economic Association, vol. 81(3), pages 497-513, June.
    16. S. Rao Aiyagari, 1988. "Banking panics, information, and rational expectations equilibrium," Working Papers 320, Federal Reserve Bank of Minneapolis.
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