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Can Emerging Market Central Banks Bail Out Banks? A+L4848 Cautionary Tale From Latin America


  • Luis I. Jacome H.
  • Tahsin Saadi Sedik
  • Simon Townsend


This paper investigates whether developing and emerging market countries can implement monetary policies similar to those used by advanced countries during the recent global crisis - injecting significant amounts of money into the financial system without facing major short-run adverse macroeconomic repercussions. Using panel data techniques, the paper analyzes episodes of financial turmoil in 16 Latin America during 1995-2007. The results show that developing and emerging market countries should be cautious because injecting money on a large scale into the financial system may fuel further macroeconomic instability, increasing the chances of simultaneous currency crises.

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  • Luis I. Jacome H. & Tahsin Saadi Sedik & Simon Townsend, 2011. "Can Emerging Market Central Banks Bail Out Banks? A+L4848 Cautionary Tale From Latin America," IMF Working Papers 11/258, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:11/258

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    8. Kenneth Rogoff & Yu-chin Chen, 2002. "Commodity Currencies and Empirical Exchange Rate Puzzles," IMF Working Papers 02/27, International Monetary Fund.
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    Cited by:

    1. Patrick A. Imam & Erlend Nier & Luis Ignacio Jácome, 2012. "Building Blocks for Effective Macroprudential Policies in Latin America; Institutional Considerations," IMF Working Papers 12/183, International Monetary Fund.
    2. Judit Krekó & Csaba Balogh & Kristóf Lehmann & Róbert Mátrai & György Pulai & Balázs Vonnák, 2013. "International experiences and domestic opportunities of applying unconventional monetary policy tools," MNB Occasional Papers 2013/100, Magyar Nemzeti Bank (Central Bank of Hungary).
    3. Kristóf Lehmann, 2012. "International experiences with unconventional central bank instruments," MNB Bulletin (discontinued), Magyar Nemzeti Bank (Central Bank of Hungary), vol. 7(2), pages 24-30, June.
    4. Mariam El Hamiani Khatat, 2016. "Monetary Policy in the Presence of Islamic Banking," IMF Working Papers 16/72, International Monetary Fund.

    More about this item


    Central banks and their policies; Central banks; Currency crises; Banking crises; Financial stability; Monetary policy; banking; central bank; Financial Markets and the Macroeconomy;

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