Can emerging market central banks bail out banks? A cautionary tale from Latin America

Jacome, I H Luis; Sedik, Tahsin Saadi; Townsend, Simon

doi:10.1016/j.ememar.2012.07.002

Cited by 7 publications

(3 citation statements)

References 33 publications

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“…10. The use of system-GMM is generally recommended over first-difference GMM (due to conceptual and statistical shortcomings, such as lagged levels being poor instruments for first-differenced variables; Jacome, Sedik, & Townsend, 2012), especially when the variables' frequency is in multi-year averages and the time dimension is necessarily small. Results obtained with the one-step GMM estimator are reported; it is more reliable for finite sample inference as the asymptotic standard errors of the twostep GMM estimator can be biased downwards (Blundell & Bond, 1998;Bond, Hoeffler, & Temple, 2001;Madariaga & Poncet, 2007).…”

Section: Supplemental Datamentioning

confidence: 99%

The influence of decentralized taxes and intergovernmental grants on local spending volatility

Sacchi

Salotti

2015

Regional Studies

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The influence of decentralized taxes and intergovernmental grants on local spending volatility. Regional Studies. This paper studies what affects the volatility of sub-central public spending in 20 Organisation for Economic Co-operation and Development (OECD) countries. The evidence based on data from 1972 to 2007 shows that the volatility of intergovernmental grants from upper levels is positively associated with the volatility of local expenditure. On the other hand, the volatility of local tax revenues -mainly that of property taxes -exerts the opposite effect. These findings suggest that making local governments rely more on grants than own tax revenues adversely affects their spending stability. Allowing them to levy autonomously taxes relying on responsive tax bases provides incentives to smooth their expenditure. L'impact de la décentralisation fiscale et de l'octroi des subventions intergouvernementales sur la volatilité des dépenses locales. Regional Studies. Cet article étudie ce qui influe sur la volatilité des dépenses publiques au niveau régional dans 20 pays de l'Organisation de coopération et de développement économique (OCDE). À partir des données pour la période allant de 1972 jusqu'à 2007, les résultats laissent voir une corrélation positive entre la volatilité des subventions intergouvernementales provenant des niveaux supérieurs d'administration avec la volatilité des dépenses locales. De l'autre côté, la volatilité des recettes fiscales locales -principalement les impôts fonciers -produit l'effet contraire. Ces résultats laissent supposer que la dépendance des administrations locales des subventions plutôt que des recettes fiscales propres a un effet négatif sur la stabilité de leurs dépenses. Leur permettre de prélever de façon autonome des impôts qui reposent sur des assiettes fiscales adaptables fournit des incitations au lissage de leurs dépenses. MOTS-CLÉS RESUMENLa influencia de los impuestos descentralizados y las subvenciones intergubernamentales en la volatilidad del gasto local. Regional Studies. En este artículo estudiamos qué factores influyen en la volatilidad del gasto público subcentral en 20 países de la Organización para la Cooperación y el Desarrollo Económico (OCDE). Según los resultados de datos de 1972 a 2007, la volatilidad de las subvenciones intergubernamentales de niveles superiores está positivamente asociada a la volatilidad del gasto local. Por otra parte, la volatilidad de los ingresos fiscales locales -principalmente de impuestos inmobiliarios-ejerce el efecto contrario. Estos resultados indican que si los Gobiernos locales confíen más en las subvenciones que en sus propios ingresos fiscales se produce un efecto negativo en la estabilidad de sus gastos. Si se permite que recauden impuestos autónomamente y cuenten con bases impositivas receptivas se crean incentivos para amortiguar sus gastos. PALABRAS CLAVESvolatilidad del gasto local; ingresos locales; impuestos inmobiliarios; subvenciones intergubernamentales JEL E62, H71, H77, R50 HISTORY

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Section: Supplemental Datamentioning

confidence: 99%

The influence of decentralized taxes and intergovernmental grants on local spending volatility

Sacchi

Salotti

2015

Regional Studies

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“…12 These measures did not solve the problem; they just deferred it and may have even been at the root of the bad debt crisis that broke out in Vietnam a few years later. 13 Jacome H. et al (2012) show that central banks in developing and emerging market countries should be cautious in implementing monetary policies to cope with financial crises because injecting money into the financial system may fuel further macroeconomic instability. In the case of Vietnam, depositors who had never experienced such bailouts in banking crises then started to assume that the government would be willing to use all available means to save its banks to avoid a systemic failure of the entire banking system.…”

Section: The Impact Of the 2008 Financial Crisis On Vietnammentioning

confidence: 99%

Making depositors greedy and careless: Government safety nets and the degradation of depositor discipline

Phung,

Troege

2024

Econ of Transit and Inst Chang

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In emerging countries, deposits play an important role in banks' total funding; hence, depositor discipline may significantly impact banking performance and financial system stability. This paper investigates depositor discipline before and after Vietnam's 2008–2011 banking crisis when depositors had little experience regarding bank bailouts and the amount of deposit insurance was limited to a low cap. The study points out that before the crisis, the level of deposit financing in banks depended on both the interest rates offered and on measures of banks' risk‐taking. After the crisis, given that the Vietnamese government prevented all bank failures to ensure economic, political, and social stability, depositors still react to interest rate changes, but substantially less to risk. This suggests that they have learned that their deposits are safe regardless of the risk the bank is taking.

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“…For instance, this was also the case for Russia (IMF, 2013) which risked a currency crisis from highly accommodative monetary conditions. 14 Jacome, Sedik, and Townsend (2011) also note that monetary loosening and unconventional monetary policy in Latin American counties during financial distress fueled capital outflows, increasing the probability of a currency crisis.…”

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confidence: 99%

Indonesia

2021

IMF Staff Country Reports

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Can emerging market central banks bail out banks? A cautionary tale from Latin America

Cited by 7 publications

References 33 publications

The influence of decentralized taxes and intergovernmental grants on local spending volatility

The influence of decentralized taxes and intergovernmental grants on local spending volatility

Making depositors greedy and careless: Government safety nets and the degradation of depositor discipline

Indonesia

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