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Foreign Banks and Credit Volatility: The Case of Latin American Countries

Meriem Haouat, Diego Moccero () and Ramiro Sosa Navarro

MPRA Paper from University Library of Munich, Germany

Abstract: Foreign bank presence has substantially increased in Latin America during the second half of the 1990s, which has prompted an intense debate on its banking and macroeconomic consequences. In this paper, we apply ARCH techniques to jointly estimate the impact of foreign bank presence on the level and volatility of real credit in a panel of eight Latin American countries, using quarterly data over the period 1995:1-2001:4. Results show that, together with financial development, foreign bank presence has contributed to reduce real credit volatility, improving the buffer shock function of the banking sector. This finding is consistent with the fact that foreign banks are typically well diversified institutions holding higher quality assets and having access to a broad set of liquidity sources. Keywords: foreign banks; credit volatility; Latin America; panel data; ARCH techniques

Keywords: Foreign Banks; Credit Volatility; Latin America; Panel Data; ARCH techniques (search for similar items in EconPapers)
JEL-codes: C33 E51 G21 (search for similar items in EconPapers)
Date: 2010-03-15
New Economics Papers: this item is included in nep-ban, nep-fmk, nep-ifn and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Foreign Banks and Credit Volatility: The Case of Latin American Countries (2012) Downloads
Working Paper: Foreign Banks and Credit Volatility: The Case of Latin American Countries (2010) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:22991

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