TY  - JOUR
AU  - Paolera,Gerardo della
AU  - Taylor,Alan M.
TI  - Gaucho Banking Redux
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9457
PY  - 2003
Y2  - January 2003
UR  - http://www.nber.org/papers/w9457
L1  - http://www.nber.org/papers/w9457.pdf
N1  - Author contact info:
Gerardo della Paolera
Global Development Network
Plot No. 4, Vasant Kunj Institutional Area
New Delhi - 110 070
INDIA
Tel: 91112613-9494
Fax: 9111-2613-6893
E-Mail: gdellapaolera@gdnet.org

Alan M. Taylor
Department of Economics
University of Virginia
Monroe Hall
Charlottesville, VA 22903
Fax: (434) 982-2904
E-Mail: alan.m.taylor@virginia.edu
AB  - Argentina's economic crisis has strong similarities with previous crises stretching back to the nineteenth century. A common thread runs through all these crises: the interaction of a weak, undisciplined, or corruptible banking sector, and some other group of conspirators from the public or private sector that hasten its collapse. This pampean propensity for crony finance was dubbed  gaucho banking' more than one hundred years ago. What happens when such a rotten structure interacts with a convertibility plan? We compare the 1929 and 2001 crises  the two instances where rigid convertibility plans failed  and reach two main conclusions. First, a seemingly robust currency-board can be devastated by an ill-conceived approach to the problems of internal and external convertibility (or, to rephrase Gresham, bad inside money drives out good outside money'). Second, when modern economic orthodoxy collides with caudillo-style institutional backwardness, a desperate regime with its hands tied in both monetary and fiscal domains will be sorely tempted by a  capital levy' on the financial sector (for, as Willie Sutton said when asked why he robbed banks,  because that's where the money is).
ER  -