Can emerging market central banks bail out banks? A cautionary tale from Latin America

Luis Jácome, Tahsin Saadi Sedik () and Simon Townsend

Emerging Markets Review, 2012, vol. 13, issue 4, 424-448

Abstract: This paper investigates whether emerging market countries can implement monetary policies to cope with financial crises as advanced countries did 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 American countries 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.

Keywords: Banking crises; Central banks; Currency crises; Financial stability (search for similar items in EconPapers)
JEL-codes: E44 E52 E58 N26 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:13:y:2012:i:4:p:424-448

DOI: 10.1016/j.ememar.2012.07.002

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