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Five years of competitive and stable real exchange rate in Argentina, 2002-2007

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  • Roberto Frenkel
  • Martin Rapetti

Abstract

We argue that the macroeconomic regime focused on the preservation of a stable and competitive real exchange rate (SCRER) has been a key factor explaining the rapid growth experienced in Argentina during 2002-2007. This policy promoted economic growth not only by preserving external and fiscal accounts sustainability, but also by providing incentives to the tradable sector and thus encouraging the expansion of its production, employment and investment. Monetary and exchange rate policies aimed at preserving a SCRER collide with conventional wisdom, particularly with the open economy trilemma. We argue that the critiques based on the trilemma may fail to hold in situations of excess supply of foreign currency and analyze the conditions under which the SCRER policy is sustainable.

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Bibliographic Info

Article provided by Taylor and Francis Journals in its journal International Review of Applied Economics.

Volume (Year): 22 (2008)
Issue (Month): 2 ()
Pages: 215-226

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Handle: RePEc:taf:irapec:v:22:y:2008:i:2:p:215-226

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Related research

Keywords: real exchange rate; growth; monetary policy; trilemma; Argentina;

References

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  1. Taylor, Alan M & Taylor, Mark P, 2004. "The Purchasing Power Parity Debate," CEPR Discussion Papers 4495, C.E.P.R. Discussion Papers.
  2. Mario DAMİLL & Martin RAPETTİ & Roberto FRENKEL, 2005. "The Argentinean debt: History, default and restructuring," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 20(236), pages 5-26.
  3. Eswar S. Prasad & Raghuram G. Rajan & Arvind Subramanian, 2007. "Foreign Capital and Economic Growth," NBER Working Papers 13619, National Bureau of Economic Research, Inc.
  4. Roberto Frenkel & Lance Taylor, 2006. "Real Exchange Rate, Monetary Policy and Employment," Working Papers 19, United Nations, Department of Economics and Social Affairs.
  5. Frenkel, Roberto & Ros, Jaime, 2006. "Unemployment and the real exchange rate in Latin America," World Development, Elsevier, vol. 34(4), pages 631-646, April.
  6. Polterovich, Victor & Popov, Vladimir, 2003. "Accumulation of Foreign Exchange Reserves and Long Term Growth," MPRA Paper 20069, University Library of Munich, Germany.
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Citations

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Cited by:
  1. Andrés Schneider, 2010. "Gross Substitutability of Financial Assets: Effects on Monetary Policy," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(60), pages 105-136, October -.
  2. Roberto Frenkel & Martin Rapetti, 2010. "A Concise History of Exchange Rate Regimes in Latin America," UMASS Amherst Economics Working Papers 2010-01, University of Massachusetts Amherst, Department of Economics.
  3. Giovanni Andrea Cornia, 2012. "Inequality Trends and their Determinants: Latin America over 1990-2010," Working Papers Series wp2012_02.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze dell'Economia e Dell'Impresa.
  4. Gerald Epstein, 2009. "Rethinking Monetary and Financial Policy: Practical suggestions for monitoring financial stability while generating employment and poverty reduction," Published Studies ilo_epstein11_09, Political Economy Research Institute, University of Massachusetts at Amherst.
  5. Cornia, Giovanni Andrea, 2012. "Inequality Trends and their Determinants: Latin America over 1990-2011," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  6. Epstein, Gerald, 2009. "Rethinking monetary and financial policy : practical suggestions for monitoring financial stability while generating employment and poverty reduction," ILO Working Papers 434439, International Labour Organization.
  7. Mario Cimoli & Wellington Pereira & Gabriel Porcile & Fábio Scatolin, 2011. "Structural change, technology, and economic growth: Brazil and the CIBS in a comparative perspective," Economic Change and Restructuring, Springer, vol. 44(1), pages 25-47, April.
  8. Arslan Razmi & Martin Rapetti & Peter Skott, 2009. "The Real Exchange Rate as an Instrument of Development Policy," UMASS Amherst Economics Working Papers 2009-07, University of Massachusetts Amherst, Department of Economics.
  9. Giovanni Andrea Cornia, 2012. "The New Structuralist Macroeconomics and Income Inequality," Working Papers Series wp2012_25.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze dell'Economia e Dell'Impresa.
  10. Giovanni Andrea Cornia & Bruno Martorano, 2010. "Policies for Reducing Income Inequality: Latin America During the Last Decade," Working papers 1006, UNICEF,Division of Policy and Strategy.
  11. Epstein, Gerald & Heintz, James & Ndikumana, Léonce & Chang, Grace, 2010. "Employment, poverty and economic development in Madagascar : a macroeconomic framework," ILO Working Papers 455446, International Labour Organization.

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