{
  "title": "Central Bank Involvement in Banking Crises in Latin America",
  "publication": "IMF Working Papers, May 1, 2008",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/central-bank-involvement-in-banking-crises-in-latin-america-21966",
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  "summary": "This paper reviews the nature of central bank involvement in 26 episodes of financial disturbance and crises in Latin America from the mid-1990s onwards. It finds that, except in a handful of cases, large amounts of central bank money were used to cope with large and small crises alike.",
  "sections": [
    {
      "heading": "Summary and key findings",
      "content": "- Reviews the nature of central bank involvement in 26 episodes of financial disturbance and crises in Latin America from the mid-1990s onwards.\n- Finds that, except in a handful of cases, large amounts of central bank money were used to cope with large and small crises alike.\n- States that pouring central bank money into the financial system generally:\n  - derailed monetary policy,\n  - fueled further macroeconomic unrest,\n  - contributed to simultaneous currency crises,\n  - thereby aggravating financial instability.\n- Contrasts these outcomes with episodes where central bank money issuance was restricted and bank resolution was timely executed:\n  - financial disturbances were handled with less economic cost.\n  - this strategy worked provided appropriate institutional arrangements were in place.\n- Emphasizes the importance of building a suitable framework for preventing and managing banking crises."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Limit central bank money issuance during banking disturbances to avoid derailing monetary policy.\n- Prioritize timely bank resolution to reduce economic costs of financial disturbances.\n- Establish appropriate institutional arrangements to enable restricted monetary issuance and effective bank resolution.\n- Recognize that large liquidity injections can exacerbate macroeconomic unrest and trigger simultaneous currency crises.\n\n---\n\n Content in this bundle\n\n- wp08135 — Banking Crises and Monetary Policy\n  - wp08135 — Banking Crises and Monetary Policy (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp08135 — Banking Crises and Monetary Policy (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/central-bank-involvement-in-banking-crises-in-latin-america-21966"
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    "Authors: Luis Ignacio Jácome",
    "Published: May 1, 2008",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451869941.001",
    "Reviews the nature of central bank involvement in 26 episodes of financial disturbance and crises in Latin America from the mid-1990s onwards.",
    "Finds that, except in a handful of cases, large amounts of central bank money were used to cope with large and small crises alike.",
    "States that pouring central bank money into the financial system generally:",
    "Contrasts these outcomes with episodes where central bank money issuance was restricted and bank resolution was timely executed:",
    "Emphasizes the importance of building a suitable framework for preventing and managing banking crises.",
    "Limit central bank money issuance during banking disturbances to avoid derailing monetary policy.",
    "Prioritize timely bank resolution to reduce economic costs of financial disturbances.",
    "Establish appropriate institutional arrangements to enable restricted monetary issuance and effective bank resolution.",
    "Recognize that large liquidity injections can exacerbate macroeconomic unrest and trigger simultaneous currency crises.",
    "**_wp08135 — Banking Crises and Monetary Policy**"
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