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Foreign and Domestic Bank Participation in Emerging Markets: Lessons from Mexico and Argentina

20 Pages Posted: 7 Mar 2006  

B. Gerard Dages

Federal Reserve Banks - Federal Reserve Bank of New York

Linda S. Goldberg

Federal Reserve Bank of New York; National Bureau of Economic Research (NBER)

Daniel Kinney

Federal Reserve Banks - Federal Reserve Bank of New York

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Abstract

It is generally agreed that strong domestic financial systems play an important role in attaining overall economic development and stabilization. The role played by foreign banks in achieving this goal, however, is still controversial. This article brings new evidence to the debate over foreign participation by examining the lending patterns of domestic and foreign banks in Argentina and Mexico during the 1990s. The authors conclude that foreign banks in both countries typically have stronger and less volatile loan growth than their domestic counterparts. The corollary to this finding, however, is that bank health - not ownership per se - is the critical element in the growth, volatility, and cyclicality of bank credit. Still, diversity of ownership is found to contribute to greater credit stability in times of financial system turmoil and weakness.

Keywords: bank, emerging markets, lending, Mexico, Argentina, ownership

JEL Classification: F3, F34, G21, N20

Suggested Citation

Dages, B. Gerard and Goldberg, Linda S. and Kinney, Daniel, Foreign and Domestic Bank Participation in Emerging Markets: Lessons from Mexico and Argentina. Economic Policy Review, Vol. 6, No. 3, September 2000. Available at SSRN: https://ssrn.com/abstract=888756

B. Gerard Dages

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Linda S. Goldberg (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-2836 (Phone)
212-720-6831 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Daniel Kinney

Federal Reserve Banks - Federal Reserve Bank of New York

33 Liberty Street
New York, NY 10045
United States

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