Intermediation Spreads in a Dual Currency Economy: Argentina in the 1990s

Author/Editor:

Luis Catão

Publication Date:

June 1, 1998

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The currency board arrangement and widespread dollarization of the Argentine economy since 1991 have laid the basis for domestic interest rates to converge to international levels. Although such a convergence has been observed for interest rates on bank deposits, interest rates on bank lending remain well above industrial country levels. This paper examines the causes of high intermediation spreads in Argentina using a dual currency model of the banking industry, which incorporates key features of credit markets in that country. Empirical results allow inferences to be drawn on the effects of macroeconomic and financial policies on bank lending and interest rates.

Series:

Working Paper No. 1998/090

Subject:

Bank credit Banking Commercial banks Currencies Exchange rate risk Financial institutions Financial regulation and supervision Loans Money

English

Publication Date:

June 1, 1998

ISBN/ISSN:

9781451952025/1018-5941

Stock No:

WPIEA0901998

Pages:

38

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