Can subsidiaries of foreign banks contribute to the stability of the Forex market in Emerging Economies?
Over the last decade, the ownership of the banking sector in Latin America has changed hands from local shareholders to large foreign banks from Spain and the United States. It is also a fact that the foreign exchange market in these countries has been segmented through various kinds of restrictions, because the central bank is unable to function as a lender of last resort in a currency other than its own. The standing issue is whether in practice, a parent bank effectively takes the role of such lender of last resort in supporting its subsidiaries overseas. If that were to be the case, the question is if having a significant participation of foreign subsidiaries is a necessary condition for lifting such restrictions. The data on the compliance of domestic and foreign banks with the dollar reserve requirements in Mexico is used to try to address this question. The answer is a qualified yes. When there are weak domestic banks, it seems that subsidiaries fo foreign banks have a better access to funding in foreign exchange, specially in times of stress. However, when compared with strong domestic banks, the evidence suggests that these local entities can do as well or even better than the foreign subsidiaries.
|Date of creation:||Oct 2002|
|Contact details of provider:|| Postal: Camino a Sta. Teresa 930, Mexico, D.F. 10700|
Phone: +525 628 4197
Fax: +525 628 4058
Web page: http://cie.itam.mx/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Chinn, Menzie-D & Dooley, Michael-P, 1997.
"Financial Repression and Capital Mobility: Why Capital Flows and Covered Interest Rate Differentials Fail to Measure Capital Market Integration,"
Monetary and Economic Studies,
Institute for Monetary and Economic Studies, Bank of Japan, vol. 15(2), pages 81-103, December.
- Michael P. Dooley & Menzie Chinn, 1995. "Financial Repression and Capital Mobility: Why Capital Flows and Covered Interest Rate Differentials Fail to Measure Capital Market Integration," NBER Working Papers 5347, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:cie:wpaper:0205. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Diego Dominguez)
If references are entirely missing, you can add them using this form.