Argentine Banks and Macroeconomic Risk: Overborrowing and Credit Dynamics


Pill, Huw. 2002. “Argentine Banks and Macroeconomic Risk: Overborrowing and Credit Dynamics.” Program for Honoring Professor Ronald McKinnon. Stanford Center for International Development. Copy at
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Explanations of the boom/bust economic cycle characteristic of emerging markets have emphasized the role of institutional weaknesses in the financial sector in creating macroeconomic instability. Testing this proposition using aggregate data is complicated by the difficulty of identifying banks' credit supply decisions independently of credit demand by the domestic non–financial private sector. In this paper, a panel of Argentine bank balance sheet data is used to investigate the cross–sectional variation in bank lending decisions in response to macroeconomic shocks. The emergence of systematic cross–sectional patterns suggests bank characteristics – and thus bank behavior – play an important role in transmitting macroeconomic shocks to emerging market economies.



Last updated on 03/25/2015