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Making explosive cocktails: Recipes and costs of 20 Argentine crises from 1865 to 2004

Author

Listed:
  • Ana María Cerro

    (Facultad de Ciencias Económicas, Instituto de Investigaciones Económicas, Universidad Nacional de Tucumán, Argentina)

  • Osvaldo Meloni

    (Facultad de Ciencias Económicas, Instituto de Investigaciones Económicas, Universidad Nacional de Tucumán, Argentina)

Abstract

The objective of this paper is twofold. Firstly, we investigate what were the “recipes” of the 20 Argentine currency crises from 1865 to 2004 using regression tree analysis, which is a non-parametric data classification technique. Secondly, we evaluate the costs of Argentina's crises in terms of output losses and recovery time. We obtained three “recipes” that constitute an early warning system. The most costly and frequent mix has two “ingredients”: high Public Expenditures (% of GDP) and Current Account Deficit (% of GDP). The less frequent and less costly mix consists of moderate Public Expenditures, Real Exchange Rate Overvaluation, and high International Interest Rates. Finally, the mix with intermediate costs and medium frequency is made up of five ingredients: moderate Public Expenditures, Real Exchange Rate Overvaluation, moderate International Interest Rates, strong decline in Bank Deposits, and high ratio of Monetary Aggregate M2 to International Reserves. KEY Classification-JEL: E32. N26

Suggested Citation

  • Ana María Cerro & Osvaldo Meloni, 2014. "Making explosive cocktails: Recipes and costs of 20 Argentine crises from 1865 to 2004," Investigaciones de Historia Económica (IHE) Journal of the Spanish Economic History Association, Asociación Española de Historia Económica, vol. 10(02), pages 104-114.
  • Handle: RePEc:ahe:invest:v:10:y:2014:i:02:p:104-114
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    References listed on IDEAS

    as
    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters, in: This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press.
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    4. Felton, Andrew & Reinhart, Carmen M. (ed.), 2009. "The First Global Financial Crisis of the 21st Century Part II: June–December, 2008," Vox eBooks, Centre for Economic Policy Research, number p199, December.
    5. Reinhart, Karmen & Rogoff, Kenneth, 2009. ""This time is different": panorama of eight centuries of financial crises," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 77-114, March.
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    7. repec:cuf:journl:y:2014:v:15:i:2:reinhart:rogoff is not listed on IDEAS
    8. Bordo, Michael & James, Harold, 2010. "The Great Depression analogy1," Financial History Review, Cambridge University Press, vol. 17(2), pages 127-140, October.
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    More about this item

    Keywords

    Currency crises. Classification tree analysis. Crises costs. Argentina;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • N26 - Economic History - - Financial Markets and Institutions - - - Latin America; Caribbean

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