Macroeconomic Shocks and Financial Vulnerability

The aim of this paper is to identify the relationship between macroeconomic shocks and financial vulnerability in the Argentine case for the period 1977-2004, by using VEC models. The results show that falls in the deposit-currency ratio (indicator of crisis or financial vulnerability) would be associated with capital outflows, drops in the terms of trade, contractions in real GDP, depreciations in real exchange rates, and increases in international real interest rates. Economic recessions Granger-cause deposit-currency ratio declines; whereas real GDP would behave like a (weak and strong) exogenous variable.