Banks and Macroeconomics Disturbances under Predetermined Exchange Rates

Sebastian Edwards and Carlos Vegh

No 5977, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: As the recent Mexican crisis vividly illustrates, Latin American countries often go through boom-bust cycles caused by both domestic policies and external shocks. Such cycles are typically magnified by weak banking systems which intermediate large capital inflows. This paper develops a simple optimizing model to analyze how the banking sector affects the propagation of shocks. In particular, we show how the world business cycle and shocks to the banking system affect output and employment through fluctuations in bank credit. We also analyze the countercyclical use of reserve requirements. Econometric evidence for Chile and Mexico supports the main predictions of the model.

JEL-codes: E3 F31 (search for similar items in EconPapers)
Date: 1997-03
Note: IFM
References: Add references at CitEc
Citations: View citations in EconPapers (153)

Published as Journal of Monetary Economics, Vol.40 (November 1997): 239-278.

Downloads: (external link)
http://www.nber.org/papers/w5977.pdf (application/pdf)

Related works:
Journal Article: Banks and macroeconomic disturbances under predetermined exchange rates (1997)
Working Paper: Banks and Macroeconomic Disturbances Under Predetermined Exchange Rates (1997)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:5977

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w5977

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().