Argentina's Desperate Dollarization and Global Trade Realities

Review of Radical Political Economics, 2007

Argentina's crisis at the end of the twentieth century surprised economists. Argentina turned from a "Latin American miracle" to an unprecedented failure. This article looks into the crisis stressing the role of the exchange rate regime and emphasizes the overvaluation of the real exchange rate as a part of capital's strategy to decompose labor and restructure capital-labor relations. Argentina's crisis resulted from the combination of capital's strategic success and the recomposition of labor in the late nineties.

2001

Presentamos un esquema no tradicional para el análisis de los efectos de una asociación monetaria asimétrica (como la dolarización) desde el punto de vista del país que ata su política monetaria. En la parte analítica discutimos la relación entre volatilidad nominal, volatilidad real y riesgo país. Dada la función de pérdida del gobierno, determinamos las condiciones necesarias para que la dolarización reduzca la pérdida social. Concentramos el análisis en dos aspectos principales: 1) el grado de sincronización entre los ciclos del país líder y el asociado y 2) el efecto y la importancia relativa de los canales comercial y financiero. Aplicamos la metodología propuesta al caso de Argentina usando coeficientes de correlación cíclica, calculadas con diferentes metodologías, y luego calculamos la importancia de cada canal usando un modelo VEC.

2001

The aim of this work is to present in a systematic way elements around the debate on the persistence of a central bank arrangement, currency boards or the Dollarization option. In some special circumstances, both later arrangements could be desirable. They are not a universal panacea in the way to stabilization and sound growth. The case of Argentina in recent decades is analyzed. There, the currency board could be an intermediate step to full Dollarization.

Cato Journal, 1999

When Carlos Menem was first elected President of Argentina in 1989, the economy was in shambles. Since then, his governments have delivered an almost unbelievable set of free-market reforms. In consequence, Argentina’s economic freedom ranking has improved more than any other country in the world in the 1990s, moving from 59th in 1990 to 7th in 1997 (Gwartney and Lawson 1998). The linchpin for Argentina’s economic reforms has been the currency board–like system that was instituted on April 1, 1991. Argentines call this system, and the wider economic reforms it has spurred, ‘‘convertibility,’’ an uncommon term for an unusual system. The system has some peculiar features that most observers neglect. An orthodox currency board system is a monetary institution that issues notes and coins. These notes and coins are backed with a minimum of 100 percent (up to a maximum of 110 percent) of foreign reserve currency, and they are fully convertible into the reserve currency at a fixed exchange...

In this paper we present an alternative framework to neoclassical theory of international trade and exchange rate determination. Our model, inspired in the classical tradition, provides support for the assertion that an exchange rate policy aiming to improve national competitiveness and to bring about a sustained trade surplus is a viable option. In fact, the success of this strategy does not depend on the effectiveness of monetary sterilization —as many argentinean heterodox authors claim— but on the ability to overcome the boundaries imposed by the evolution of the domestic wage rate and the potential emergence of competitive devaluations. In the particular case of Argentina, the introduction of export taxes on land-intensive commodities, in which the economy has absolute advantages, brings an additional policy tool that can make both the exchange rate target and the workers claims consistent.

2018

At the beginning of May 2018, after the Federal Reserve Bank had announced an increase in the benchmark interest rate, Argentina experienced a currency crisis that the central bank was unable to quell. As a result, the value of Argentina’s currency, the peso, fell nearly by 8 percent in one day against the US dollar, a devaluation noticeably higher than those experienced by other Latin American countries. For several days, in what has become a regular event over the past few decades, journalists eagerly discussed the peso–dollar exchange rate, which also had a prominent place in the news. In one prime time current affairs program, a journalist observed that during the first week of May, 3 percent of Twitter exchanges in Buenos Aires had included the word “dollar,” a percentage equivalent to that of New York City...

Policy Research Working Papers, 2003

A rgentina's currency board was a textbook model of a rigid exchange rate regime for more than ten years. The subsequent collapse of the financial system yields important lessons for the debate on exchange rate regimes for developing countries. 1 As expected, the Argentine case has already generated much debate on the causes and policy implications of the crisis. 2 Current explanations, however, concentrate too much on the last years of the experiment and do not pay enough attention to the underlying logic of the currency board and its implications for the financial system and the economy at large. In this paper, we study the Argentine experience from a perspective that links money (in its function as a store of value) and financial intermediation. This approach has important advantages. By organizing the discussion of the different intervening factors around a main motive, it allows us to balance the breadth of a comprehensive survey with the focus needed to 43

1999

SSRN Electronic Journal, 1999

This is a clear difference with other countries in Latin America. For instance, in Colombia and Brazil agricultural exports were not "wage goods" and therefore the trade off between keeping a competitive exchange rate and industrialization did not occur.