Mexico's Financial Sector Crisis: Propagative Linkages to Devaluation

Posted: 3 Nov 2000

See all articles by Berry K. Wilson

Berry K. Wilson

Pace University - Department of Finance and Economics

Anthony Saunders

New York University - Leonard N. Stern School of Business

Gerard Caprio

Williams College

Abstract

The sharp 1994 Mexican peso devaluation was followed by a financial-sector crisis, forcing the Mexican government to retake control of several banks and to grant substantial assistance to many others. This paper tests several hypotheses concerning the impact of devaluation. First, event-study methodology is used to test whether some sectors of Mexican economy were 'devaluation-gaining' while others were 'devaluation-losing'. Second, we test whether devaluation shocks were transmitted to the financial sector through the liability side versus the asset side of bank balance sheets. Our results indicate the importance of asset diversification.

JEL Classification: F31, F39

Suggested Citation

Wilson, Berry K. and Saunders, Anthony and Caprio, Gerard, Mexico's Financial Sector Crisis: Propagative Linkages to Devaluation. The Economic Journal, Vol. 110, Issue 460, January 2000. Available at SSRN: https://ssrn.com/abstract=233429

Berry K. Wilson (Contact Author)

Pace University - Department of Finance and Economics ( email )

Lubin School of Business
New York, NY 10038
United States

Anthony Saunders

New York University - Leonard N. Stern School of Business ( email )

44 West 4th Street
9-190, MEC
New York, NY 10012-1126
United States
212-998-0711 (Phone)
212-995-4220 (Fax)

Gerard Caprio

Williams College ( email )

Williamstown, MA 01267
United States
413-597-2465 (Phone)
413-597-4045 (Fax)

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