TY  - JOUR
AU  - Auguste,Sebastian
AU  - Dominguez,Kathryn M.E.
AU  - Kamil,Herman
AU  - Tesar,Linda L.
TI  - Cross-Border Trading as a Mechanism for Capital Flight: ADRs and the Argentine Crisis
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9343
PY  - 2002
Y2  - November 2002
UR  - http://www.nber.org/papers/w9343
L1  - http://www.nber.org/papers/w9343.pdf
N1  - Author contact info:
sebastian auguste
E-Mail: sauguste@umich.edu

Kathryn M.E. Dominguez
University of Michigan
Department of Economics and Ford School
Weill Hall
735 South State Street
Ann Arbor, MI 48109
Tel: 734-764-9498
Fax: 734-763-9181
E-Mail: kathrynd@umich.edu

Herman Kamil
International Monetary Fund
Western Hemisphere Department
700 19th Street, NW
Washington DC, 20431
E-Mail: hkamil@imf.org

Linda Tesar
Department of Economics
University of Michigan
Ann Arbor, MI  48109-1220
Tel: 734/763 6015
Fax: 734/764-2769
E-Mail: ltesar@umich.edu
AB  - This paper examines the surprising performance of the Argentine stock market in the midst of the country's most recent financial crisis and the role played by ADRs in Argentine capital flight. Although Argentine investors were subject to capital controls, they were able to purchase stocks with associated ADRs for pesos in Argentina, convert them into ADRs, re-sell them in New York for dollars and deposit the dollar proceeds in U.S. bank accounts.  In the paper we show that: (1) ADR discounts went as high as 60% (indicating that Argentine investors were willing to pay significant amounts in order to legally move their funds abroad), (2) the market anticipated (correctly) a 40% devaluation, (3) local market factors in Argentina became more important in pricing peso denominated stocks with associated ADRs, while the same stocks in New York were mainly priced based on global factors, (4) capital outflow using the ADR market was substantial (our estimate is between $835 million and $3.4 billion)
ER  -