Crisis Management in Argentina During the 1994-95 Mexican Crisis: How Did Markets React?

28 Pages Posted: 24 May 1999

See all articles by Eduardo J.J. Ganapolsky

Eduardo J.J. Ganapolsky

affiliation not provided to SSRN

Sergio L. Schmukler

World Bank - Development Research Group (DECRG)

Date Written: July 1998

Abstract

The Mexican crisis of 1994-95 had strong spillover effects on Argentina. The Argentine government successfully announced a series of policies to mitigate the contagion effects. This paper studies how capital markets reacted to each policy announcement and news. Capital markets welcomed announcements that demonstrated a firm commitment to the currency board. The agreement with the IMF, the dollarization of reserve deposits in the central bank, and changes in reserve requirements had a strong positive impact on market returns. After a period of higher volatility, the appointment of a new finance minister significantly decreased the variance of stock and bond returns, while lower reserve requirements increased the volatility of interest rates.

JEL Classification: E44, E58, E65, F36, F41, G14, G15, G18

Suggested Citation

Ganapolsky, Eduardo J.J. and Schmukler, Sergio, Crisis Management in Argentina During the 1994-95 Mexican Crisis: How Did Markets React? (July 1998). World Bank Policy Research Working Paper No. 1951. Available at SSRN: https://ssrn.com/abstract=161348 or http://dx.doi.org/10.2139/ssrn.161348

Eduardo J.J. Ganapolsky

affiliation not provided to SSRN

Sergio Schmukler (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN MC 3-301
Washington, DC 20433
United States
202-458-4167 (Phone)
202-522-3518 (Fax)

HOME PAGE: http://www.worldbank.org/en/about/people/s/sergio-schmukler

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