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What can we learn from the current crisis in Argentina?

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  • Timothy J. Kehoe

Abstract

Currently, Argentina is experiencing what the government describes as a \\"great depression.\\" Using the \\"Great Depressions\\" methodology developed by Cole and Ohanian (1999) and Kehoe and Prescott (2002), we find that the primary determinants of both the boom in Argentina in the 1990s and the subsequent depression were changes in productivity, rather than changes in factor inputs. The timing of events links the boom to the currency-board-like Convertibility Plan and the crisis to its collapse. To gain credibility, the Argentine government took measures to make abandoning the plan more costly. Because the government was unable to enforce fiscal discipline, however, these increased costs failed to make the plan more credible and instead made the crisis far worse when it failed.

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  • Timothy J. Kehoe, 2003. "What can we learn from the current crisis in Argentina?," Staff Report 318, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmsr:318
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    References listed on IDEAS

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    1. Lucas, Robert E, Jr & Prescott, Edward C, 1971. "Investment Under Uncertainty," Econometrica, Econometric Society, vol. 39(5), pages 659-681, September.
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    8. Alejandro Izquierdo & Ernesto Talvi & Guillermo A. Calvo, 2002. "Sudden Stops, the Real Exchange Rate and Fiscal Sustainability: Argentina's Lessons," Research Department Publications 4299, Inter-American Development Bank, Research Department.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Italeave: Mother of all financial crises
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2018-06-04 11:55:24

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    Cited by:

    1. Nauro F. Campos & Menelaos G. Karanasos & Bin Tan, 2016. "From Riches to Rags, and Back? Institutional Change, Financial Development and Economic Growth in Argentina since 1890," Journal of Development Studies, Taylor & Francis Journals, vol. 52(2), pages 206-223, February.
    2. Campos, Nauro F & Karanasos, Menelaos & Tan, Bin, 2008. "Two to Tangle: Financial Development, Political Instability and Economic Growth in Argentina (1896-2000)," CEPR Discussion Papers 7004, C.E.P.R. Discussion Papers.
    3. Orlando Gracia & Hernando Zuleta, 2009. "Tratado de Libre Comercio entre Colombia y Estados Unidos: ¿Que? impacto puede tener en Colombia?," Coyuntura Económica, Fedesarrollo, June.
    4. Çiçek, Deniz & Elgin, Ceyhun, 2011. "Not-quite-great depressions of Turkey: A quantitative analysis of economic growth over 1968–2004," Economic Modelling, Elsevier, vol. 28(6), pages 2691-2700.
    5. Minetti, Raoul & Peng, Tao, 2013. "Lending constraints, real estate prices and business cycles in emerging economies," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2397-2416.
    6. Jérôme Sgard, 2004. "Ce qu'on en dit après - le Currency Board argentin et sa fin tragique," Post-Print hal-01019663, HAL.
    7. Pratap, Sangeeta & Quintin, Erwan, 2011. "Financial crises and labor market turbulence," Journal of Monetary Economics, Elsevier, vol. 58(6), pages 601-615.
    8. Meza, Felipe & Benjamin, David, 2006. "Productivity in economies with financial frictions: facts and a theory," Discussion Paper Series In Economics And Econometrics 613, Economics Division, School of Social Sciences, University of Southampton.
    9. Carlos Gustavo Machicado, 2007. "Macroeconomic and Welfare Effects of Public Infrastructure Investment in Five Latin American Countries," Development Research Working Paper Series 14/2007, Institute for Advanced Development Studies.
    10. Jérôme Sgard, 2004. "Ce qu'on en dit après - le Currency Board argentin et sa fin tragique," Sciences Po publications info:hdl:2441/6827, Sciences Po.
    11. Meza, Felipe & Benjamin, David, 2006. "Productivity in economies with financial frictions: facts and a theory," Discussion Paper Series In Economics And Econometrics 0613, Economics Division, School of Social Sciences, University of Southampton.
    12. Jérôme Sgard, 2004. "Ce qu’on en dit après : le « currency board » argentin et sa fin tragique," Revue d'Économie Financière, Programme National Persée, vol. 75(2), pages 129-151.
    13. Stylianos G. Gogos & Dimitris Papageorgiou & Vanghelis Vassilatos, 2018. "Rent seeking activities and aggregate economic performance - the case of Greece," Working Papers 252, Bank of Greece.
    14. Stylianos G. Gogos & Dimitris Papageorgiou & Vanghelis Vassilatos, 2017. "Rent Seeking Activities and Aggregate Economic Performance - The Case of Greece," Working Papers 201712, Athens University Of Economics and Business, Department of Economics.
    15. repec:spo:wpecon:info:hdl:2441/6827 is not listed on IDEAS
    16. Tasso Adamopoulos, 2008. "Land Inequality and the Transition to Modern Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(2), pages 257-282, April.

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    Keywords

    Monetary policy - Argentina; Argentina;

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