Title: Contending with liberalisation: crisis and recovery of the Argentine banking sector in the period of 1994 to 2011

Authors: Mine Aysen Doyran; Emre Erdogan

Addresses: Department of Economics and Business, Lehman College, The City University of New York (CUNY), 250 Bedford Park Blvd., West Bronx, New York City, NY 10468-1589, USA ' Department of International Relations, İstanbul Bilgi University, Kurtuluş Deresi Cad. Yahya Köprüsü Sok, No. 1 Dolapdere 34440 Beyoğlu, İstanbul, Turkey

Abstract: From the early 1990s until 1998, Argentina liberalised its banking system as part of a strategy to enter a globalised economy. The subsequent monetary policies, combined with 'convertibilidad' and an elevated government debt, led to a loss of confidence in the financial system, ending in the deep recession of 1998-2002. A sovereign debt default of $100 billion in December 2001 followed, and in January 2002 the fixed exchange regime was officially abandoned. This paper examines how firm-specific characteristics and the overall financial and macroeconomic environment affected Argentine bank profitability over the period 1994-2011. We use a large panel data of 62 commercial banks drawn from the Bankscope database. Our findings highlight that internal characteristics of banks (i.e., capitalisation, credit risk, operating expenses), financial environment of the banking industry and macroeconomic trends such as the growth in GDP per capita income have a significant effect on bank returns. Finally, we discuss policy outcomes including the way Central Bank of Argentina handled the crisis and trends in the banking industry. This study seeks to draw the strategic implications for banking systems in developing countries that are contending with globalisation.

Keywords: Argentina; Latin America; banking industry; economic development; financial policy; financial crisis; bank profitability; industrial organisations; bank liberalisation; monetary policy; economic recession; economic recovery; globalisation; capitalisation; credit risk; operating expenses; macroeconomics; GDP per capita income; bank returns.

DOI: 10.1504/IJEBR.2013.056123

International Journal of Economics and Business Research, 2013 Vol.6 No.3, pp.261 - 283

Published online: 30 Dec 2013 *

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