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Western Hemisphere > Argentina

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Cover IMF Working Papers
Extreme Weather Events, Agricultural Output, and Insurance: Evidence from South America
Juliette Caucheteux
,
Jonas Nauerz
, and
Svetlana Vtyurina
Extreme weather has profoundly affected countries across South America (SA), given the importance of the agricultural sector for the economies. However, these effects have not yet been properly measured. In our study, we construct a unique dataset of high-frequency satellite data on temperature, precipitation, and a Normalized Difference Vegetation Index (NDVI) that proxies the agricultural yield in selected countries. In particular, we then examine the effect of droughts on agricultural yields (soy output) and find that they have a significant negative impact and that there is heterogeneity in the response across countries. While insurance could help protect farmers against severe losses, coverage in the region is low, and barriers remain high. Building on existing literature and using a calibrated structural model, we highlight the benefits of insurance for Total Factor Productivity (TFP) and offer some recommendations for its expansion.
Keywords:
Agriculture; Productivity; NDVI; SPEI; Weather; Drought; Insurance; South America; weather event; soy output; loss from drought; benefits of insurance; NDVI in Brazil; Natural disasters; Agricultural sector; Agricultural production; Insurance companies; Caribbean
Cover IMF Staff Country Reports
Argentina: Detailed Assessment of Observance of Principles for Insurance Supervision
International Monetary Fund
Argentina’s insurance market is fragmented, and competition has increased in recent years. Currently, excessive premium discounting by insurance companies is creating risks that insurance companies may be under-reserved and may not be able to meet future liabilities. The evolution of liability insurance is positive but will require developing specific expertise. In line with developments around the world, the adoption of a risk-based supervisory approach is essential to properly monitor a rapidly evolving market. To successfully address these challenges, additional resources as well as operational independence is required.
Keywords:
ISCR; CR; risk management; business plan; financial condition; corporate governance; reinsurance company; insurance premium; regulatory agency; liability insurance; risk assessment; reinsurance policy; portfolio transfer; internal oversight; holding company; Insurance companies; Insurance; Insurance supervision; Internal controls; Legal support in revenue administration; Global
Cover Country Insurance
Country Insurance
The Role of Domestic Policies
Mr. Paolo Mauro
,
Mr. Torbjorn I. Becker
,
Mr. Jonathan David Ostry
,
Mr. Romain Ranciere
, and
Mr. Olivier D Jeanne

Abstract

This paper focuses on what countries can do on their own—that is, on the role of domestic policies—with respect to country insurance. Member countries are routinely faced with a range of shocks that can contribute to higher volatility in aggregate output and, in extreme cases, to economic crises. The presence of such risks underlies a potential demand for mechanisms to soften the blow from adverse economic shocks. For all countries, the first line of defense against adverse shocks is the pursuit of sound policies. In light of the large costs experienced by emerging markets and developing countries as a result of past debt crises, fiscal policies should seek to improve sustainability, taking into account that sustainable debt levels seem to be lower in emerging and developing countries than in advanced countries. Although much can be accomplished by individual countries through sound policies, risk management, and self-insurance through reserves, collective insurance arrangements are likely to continue playing a key role in cushioning countries from the impact of shocks.

Keywords:
OP; cost; emerging market country; commodity price futures; banking crisis dummy; crisis; terms of trade shock; lending boom date; Sudden stops; Emerging and frontier financial markets; Reserve positions; Foreign direct investment; Bonds; Global; Asia and Pacific; Africa; output event; catastrophe bond; Insurance; Caribbean
Cover Policy Papers
Country Insurance - The Role of Domestic Policies
International Monetary Fund
Member countries are routinely faced with a range of shocks that can contribute to higher volatility in aggregate output and, in extreme cases, to economic crises. The presence of such risks underlies a potential demand for mechanisms to soften the blow from adverse economic shocks -- “country insurance” for short. Protective measures that countries can take themselves (“self-insurance”) include sound economic policies, robust financial structures, and adequate reserve coverage. Beyond self insurance, countries have also established regional arrangements that pool risks, while at the multilateral level the IMF has a central role in making its resources temporarily available to attenuate the costs of economic adjustment when shocks create balance of payments difficulties for a member. This paper analyzes a number of mechanisms through which countries can self-insure, leaving the role of collective regional and multilateral arrangements to subsequent papers.
Keywords:
PP; interest rate; short-term debt; exchange rate; terms of trade; central bank; debt crisis; growth-indexed bond; opportunity cost; risk premium; GDP ratio; emerging market country; short term; Sudden stops; Emerging and frontier financial markets; Insurance; Reserve positions; Global; Asia and Pacific
Cover IMF Working Papers
Managing Systemic Liquidity Risk in Financially Dollarized Economies
Mr. Eduardo Levy Yeyati
,
Mr. Alain Ize
, and
Miguel A. Kiguel
This paper evaluates ways to protect highly dollarized banking systems from systemic liquidity runs (such as the ones that took place recently in Argentina, Uruguay, and Paraguay). In view of the limitations of available (private or official) insurance schemes, and the distortions introduced by central bank lending of last resort (LOLR), the authors favor decentralized liquid foreign asset requirements on dollar deposits, supplemented by a scheme of "circuit breakers." The latter combines the use of limited dollar liquidity to ensure the convertibility of transactional deposits with a mechanism that automatically limits the convertibility of dollar term deposits once triggered by a predetermined decline in banks' liquidity.
Keywords:
WP; dollar LOLR; liquidity holding; LOLR facility; dollar deposit; dollar liquidity; liquidation cost; Dollarization; Systemic Liquidity; Banking Crises; bank resolution system; dollar bank; bank liquidation cost; peso bank; bank resolution mechanism; liquidity levels bank; Liquidity; Commercial banks; Lender of last resort; Insurance; Correspondent banking; Europe; Africa
Cover IMF Staff Papers
IMF Staff Papers, Volume 52, Special Issue, IMF Conference in Honor of Michael Mussa
International Monetary Fund. Research Dept.
This paper focuses on expectations for the American economy focused on the likelihood of secular stagnation, which continued to be debated throughout the post-war period. Concerns rose during the late 1960s and early 1970s about rapid population growth smothering the potential for economic growth in developing countries were contradicted when, during the mid- and late-1970s, fertility rates began to decline rapidly. In policy-oriented institutions (and in most businesses and individual decision making), policymaking decisions are often guided by projections and forward-looking indicators. The case of Michael Mussa has been one of great anticipation, and of great accomplishment, and all the early optimistic forecasts about him have turned out to be correct. Within the sphere of economics, undoubtedly the most famous and widely used forecast—one, incidentally, that thus far has often been incorrect—is that based on the Malthusian doctrine of the relationship between resources and population.
Keywords:
SP; exchange rate; country; post-World War II debate; Virginia economist George Tucker; definition of Economics; voodoo economics; hike worth; Organization for Economic Cooperation and Development country; Moral hazard; Exchange rate arrangements; Insurance; Currencies; Financial integration; Global; Southeast Asia; Sub-Saharan Africa; Western Europe; Caribbean; IMF conference; graduate class; Asset prices
Cover IMF Working Papers
The Mussa Theorem (and Other Results on IMF-Induced Moral Hazard)
Mr. Olivier D Jeanne
and
Mr. Jeromin Zettelmeyer
Using a simple model of international lending, we show that as long as the IMF lends at an actuarially fair interest rate and debtor governments maximize the welfare of their taxpayers, any changes in policy effort, capital flows, or borrowing costs in response to IMF crisis lending are efficient. Thus, under these assumptions, the IMF cannot cause moral hazard, as argued by Michael Mussa (1999, 2004). It follows that examining the effects of IMF lending on capital flows or borrowing costs is not a useful strategy to test for IMF-induced moral hazard. Instead, empirical research on moral hazard should focus on the assumptions of the Mussa theorem.
Keywords:
WP; IMF lending; debtor country; emerging market
Cover IMF Working Papers
The Role of Private Sector Annuities Markets in an Individual Accounts Reform of a Public Pension Plan
Mr. George A Mackenzie
Pension reforms that establish individual accounts will diminish the relative importance of the traditional state pension while creating a significant role for individual accounts in providing income for retirement. This paper surveys the policy issues this new role entails. It offers general advice to countries considering such issues as the restrictions to be placed on the timing, extent, and form of withdrawals from individual accounts and the need for mandatory annuitization (conversion into annuities) of accumulated account balances. The paper also considers the role that private annuity markets should play and related regulatory, social safety net, tax, and administrative questions.
Keywords:
WP; annuities market; private sector; annuity payment; indexed annuity; life insurance company; Public pension reform; individual accounts; annuity markets; replacement ratio; deferred annuity; Insurance; Insurance companies; Pensions; Pension spending; Personal income; South America
Cover IMF Staff Country Reports
Argentina: Selected Issues and Statistical Annex
International Monetary Fund
The financial system in Argentina experienced substantial changes. Capital adequacy and liquidity indicators are strong in the Argentine banking industry, whereas profitability indicators are weak. The current system of mandatory health care for salaried employees is built around institutions known as obras sociales (OS). The reform addresses many problems associated with the financial system. The following statistical data are described in detail: index of agricultural production, industrial production index, price indices, automobile production, domestic demand, exports, and imports, financial assets, balance of payments, and so on.
Keywords:
ISCR; CR; yield; amount; bank; loan; tax liability; banking system; capital base; Banco Nación; financial system; Banco de la Provincia de BA; bond market; FDI inflow; return on equity; Public sector; Capital adequacy requirements; Foreign direct investment; Insurance; Loans; South America; North America
Cover IMF Working Papers
Capital Structures and Portfolio Composition During Banking Crisis: Lessons from Argentina 1995
Mr. Alberto M. Ramos
This paper constructs a theoretical framework that rationalizes banks’ short- and long-run adjustment dynamics—in portfolio composition and in the capital structure—following a period of financial distress. The model captures stylized facts about banks’ behavior following a shock to the capital base—namely, the rush to liquidity and credit crunch. Bank panel data show that Argentine domestic retail banks underwent a period of adjustment of six quarters following the Mexican devaluation crisis, reducing their risk-exposure since, owing to bank capital scarcity, depositors became less prone to tolerate bank default risk. Foreign-owned banks suffered a milder shock and adjusted immediately.
Keywords:
WP; central bank; optimal portfolio; capital structure; Banking Crisis; Argentina; Bank Capital; Tequila effect; Banking Distress; present discounted value; capital base; bank default risk; ÷ assets; adjustment dynamics; expected return; exposure bank; bank regulator; asset risk; vault reserve; insurance bank; Loans; Deposit insurance; Stocks; Bonds; Insurance