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Title:Foreign banks and credit volatility: The case of Latin American countries PDF Logo
Authors:Haouat, Meriem
Moccero, Diego Nicolas
Sosa Navarro, Ramiro
Issue Date:2010
Series/Report no.:Working paper // World Institute for Development Economics Research 2010,52
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.
Subjects:foreign banks
credit volatility
Latin America
panel data
ARCH techniques
JEL:C33
E51
G21
ISBN:978-92-9230-289-4
Document Type:Working Paper
Appears in Collections:WIDER Working Papers, United Nations University (UNU)

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