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A counterfactual analysis of the Argentinian monetary transformation in 2002

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  • A. L. Baldi-Delatte

Abstract

A hard peg restored economic stability in Argentina during the nineties but made it also vulnerable to real shocks in so far as the economy was highly dollarized. A devaluation in 1998 in Brasil, its main partner, damaged the Argentinian competitiveness and resulted in a fall in export demand. There was a need for a real adjustment but removing the peg would have implied large balance sheet effects and raised serious financial issues. This article endeavours to learn a lesson about the aftermath of hard peg regime from the Argentinian experience. It is based on a dynamic macroeconomic model to assess the impact of three scenarios, already suggested in the literature. Two hypothetical, a floating regime and dollarization and one which was actually implemented in 2002, the pesification of the whole economy. The simulations suggest that pesification was the only scenario with unambiguous expansionary effects.

Suggested Citation

  • A. L. Baldi-Delatte, 2009. "A counterfactual analysis of the Argentinian monetary transformation in 2002," Applied Economics, Taylor & Francis Journals, vol. 41(27), pages 3533-3544.
    • Handle: RePEc:taf:applec:v:41:y:2009:i:27:p:3533-3544
    DOI: 10.1080/00036840701522879
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    References listed on IDEAS

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    1. King, Robert G. & Rebelo, Sergio T., 1999. "Resuscitating real business cycles," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 14, pages 927-1007, Elsevier.
    2. Reinhart, Carmen & Calvo, Guillermo, 1999. "Inversión de las corrientes de capital, tipo de cambio y dolarización [Capital Flow Reversals, the Exchange Rate Debate, and Dollarization]," MPRA Paper 13692, University Library of Munich, Germany.
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    1. Tai‐kuang Ho & Ya‐chi Lin & Kuo‐chun Yeh, 2021. "The case for starting a new exchange rate after debt settlement: Reexamining alternatives to Argentina’s exchange rate policy in 2001–2002," Review of International Economics, Wiley Blackwell, vol. 29(3), pages 641-662, August.

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