Can Emerging Market Central Banks Bail Out Banks? A Cautionary Tale From Latin America

This paper 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. Using panel data techniques, the paper analyzes episodes of financial turmoil in 16 Latin America 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.
Publication date: November 2011
ISBN: 9781463923976
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Economics- Macroeconomics , Economics / General , International - Economics , banking , central bank , banking crises , central banks , currency crises , bank money , bank claims , banking system , domestic currency , banking crisis , bank credit , banks ? balance sheets , bank restructuring , small bank , deposit insurance , balance of payments , private banks , f

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