Can Emerging Market Central Banks Bail Out Banks? A+L4848 Cautionary Tale From Latin America
IMF Working Papers, November 1, 2011
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Bibliographic details
- Authors: Luis Ignacio Jácome, Tahsin Saadi Sedik, Simon Townsend
- Published: November 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463923976.001
Authors and publication
- By Luis Ignacio Jácome, Tahsin Saadi Sedik, Simon Townsend
- November 1, 2011
- IMF Working Papers, Working Paper No. 2011/258
- Pages: 30
- Volume: 2011
- Issue: 258
- DOI: https://doi.org/10.5089/9781463923976.001
- Stock No: WPIEA2011258
- ISBN: 9781463923976
- ISSN: 1018-5941
Research question and scope
- 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.
- Analyzes episodes of financial turmoil in 16 Latin America during 1995-2007 using panel data techniques.
Key findings
- Injecting money on a large scale into the financial system in developing and emerging market countries may fuel further macroeconomic instability.
- Large-scale central bank injections increase the chances of simultaneous currency crises in these economies.
Subject areas and keywords
- Subject: Banking, Banking crises, Currencies, Exchange rates, Financial crises, Foreign exchange, Monetary base, Money
- Keywords: bank restructuring institution, Banking crises, banking crisis, central bank assistance, central bank credibility, central bank money, central bank support, central banks, Currencies, currency crises, currency depreciation, Exchange rates, financial stability, financial support, flight to quality, Global, market share, Monetary base, monetary policy, nominal exchange rate, WP
Policy implications (as indicated by the paper)
- Developing and emerging market central banks should exercise caution before implementing large-scale monetary injections aimed at stabilizing the banking system, given the elevated risk of provoking currency crises and broader macroeconomic instability.
IMF Working Paper: "Can Emerging Market Central Banks Bail Out Banks? A+L4848 Cautionary Tale From Latin America", Luis Ignacio Jácome, Tahsin Saadi Sedik, Simon Townsend, November 1, 2011.