Information and Currency Run in a System Without a Safety Net: Argentina and the 'Tequila' Shock
Posted: 3 Aug 1998
Date Written: Undated
Abstract
This paper studies the bank panic that was triggered in Argentina by the Mexican devaluation of December 20, 1994. The evidence on this panic is unique in several ways: it is the case of a contemporary banking system with no explicit safety net (a currency board), and a case in which the run started as an attack on the currency. The panic allows to test the random-withdrawal vs. informed-based theories of bank runs and to examine the behavior of depositors under a currency run. The findings of the paper provide support to the information-based theories and show that currency runs, such as the Argentine case, can also have a component that is bank-specific and information-based.
JEL Classification: G21, G28, F31
Suggested Citation: Suggested Citation