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Can Emerging Market Central Banks Bail Out Banks? A+L4848 Cautionary Tale From Latin America
Author: Mr. Luis Ignacio Jácome, Tahsin Saadi Sedik, and Mr. Simon Townsend
Series:
IMF Working Papers
Volume/Issue:
Volume 2011: Issue 258
Language:
English
Publication Date:
01 Nov 2011
DOI:
https://doi.org/10.5089/9781463923976.001
ISBN:
9781463923976
ISSN:
1018-5941
Pages:
30
Keywords:
WP; banking crisis; financial support; central bank money; market share; monetary policy; Banking crises; central banks; currency crises; financial stability; nominal exchange rate; central bank support; central bank credibility; currency depreciation; flight to quality; bank restructuring institution; central bank assistance; Currencies; Exchange rates; Monetary base; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund