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Making Explosive Cocktails: recipes and costs for 26 Crises from 1823 to 2003

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  • Néstor Adrián Amado

    (UNSTA)

  • Ana María Cerro

    (UNSTA & Universidad Nacional de Tucumán, Argentina)

  • Osvaldo Meloni

    (Universidad Nacional de Tucumán, Argentina)

Abstract

Crises, like “explosive cocktails” are made by mixing powerful ingredients. Argentina has made 26 “explosive cocktails” since 1823. How many ingredients are needed to make an “explosive cocktail”? Which are these ingredients? Which is the most expensive mix? This paper attempts to identify the different recipes that ended up in economic crisis throughout argentine economic history by means of the regression tree analysis technique. The paper also measures Argentina’s crises costs in terms output losses. We follow the methodology used by the IMF (1998), that is, computing cumulative output lost relative to trend. It is found that there are four explosive mixes, having Fiscal Deficit, Real Exchange Rate Overvaluation, Bank Deposit growth rate decline and the ratio of External Debt to Exports as the key ingredients. The most frequent crises are those having high fiscal deficit; though average cost is higher for crises mixing moderate fiscal with strong decline in Real Bank Deposits, presumably entailing banking crises.

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File URL: http://128.118.178.162/eps/eh/papers/0510/0510001.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Economic History with number 0510001.

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Length: 20 pages
Date of creation: 06 Oct 2005
Date of revision:
Handle: RePEc:wpa:wuwpeh:0510001

Note: Type of Document - pdf; pages: 20
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Web page: http://128.118.178.162

Related research

Keywords: Currency Crises; Regression Tree Analysis; Crises Costs;

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  1. Marina Halac & Sergio L. Schmukler, 2004. "Distributional Effects of Crises: The Financial Channel," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  2. Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.).
  3. Graciela L. Kaminsky, 2003. "Varieties of Currency Crises," NBER Working Papers 10193, National Bureau of Economic Research, Inc.
  4. Barry Eichengreen & Michael D. Bordo, 2002. "Crises Now and Then: What Lessons from the Last Era of Financial Globalization," NBER Working Papers 8716, National Bureau of Economic Research, Inc.
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