Advanced Search
MyIDEAS: Login

Why did Argentina's Currency Board Collapse

Contents:

Author Info

  • Francois Gurtner
Registered author(s):

    Abstract

    This paper sheds light on the risks associated Currency Board Arrangements, referring to the liquidity crisis that emerged in Argentina in November 2000. The inability of the Argentinean economy to grow because of an overvalued peso increased the country’s reliance on external borrowings, which seriously undermined the credibility of its fixed exchange rate regime. This paper shows that with rigid labour markets, a lack of fiscal discipline and the absence of a natural anchor currency, Argentina was never a strong candidate for a hard peg. When the years of euphoric growth ended, the currency board arrangement became a trap that could not be removed smoothly given Argentina’s highly dollarised financial system. A series of measures aimed at reviving growth were implemented in order to prevent the country from defaulting on its foreign debt. But with no signs of upturn in demand, increasingly distrustful international investors and growing social unrest, the country was forced into default in December 2001, one year after the initial eruption of the liquidity crisis, putting an abrupt end to Argentina’s decade long experiment with hard money

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.sml.hw.ac.uk/documents/DP2003-E01.pdf
    Our checks indicate that this address may not be valid because: 404 Not Found. If this is indeed the case, please notify (Professor Mark Schaffer)
    Download Restriction: no

    Bibliographic Info

    Paper provided by Department of Economics, School of Management and Languages, Heriot Watt University in its series Working Papers with number E01.

    as in new window
    Length:
    Date of creation: 2003
    Date of revision:
    Handle: RePEc:hwe:hwecwp:2003-e01

    Contact details of provider:
    Postal: Edinburgh EH14 4AS
    Phone: +44(0)131 451 3497
    Fax: +44(0)131 451 3497
    Web page: http://www.sml.hw.ac.uk/departments/accountancy-economics-finance.htm
    More information through EDIRC

    Related research

    Keywords: Argentina; currency-board arrangement; debt-crisis; exchange-rate policy;

    Find related papers by JEL classification:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:hwe:hwecwp:2003-e01. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Professor Mark Schaffer).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.