Details

Subject(s)

• Argentina Caja de Conversión [Browse]
• Currency boards—Argentina [Browse]
• Monetary policy—Argentina [Browse]
• Currency question—Argentina [Browse]

Series

• Hohenheimer volkswirtschaftliche Schriften ; Band 56. [More in this series]
• Hohenheimer volkswirtschaftliche Schriften ; Band 56 [More in this series]

Summary note

This book focuses on «Convertibilidad», the latest Argentine experience of exchange rate based stabilisation, and aims at isolating the main causes for its tragic collapse in 2001-2002. The characteristics of Argentina’s high and hyperinflation during the 1980s are analysed, and the theory of currency boards is expounded. The stabilisation tool, an institutionally highly credible currency board arrangement (CBA), though highly effective, could not be an optimal long-term solution, given the country’s structural and trade characteristics. The analysis of the causes of the CBA’s collapse yields a complex picture of interacting factors, among them invaliding ones that had created multiple vulnerabilities over years, and triggering ones that unfolded their worst potential in meeting such vulnerable conditions.

Notes

Also published as the author’s doctoral thesis: Hohenheim, 2006.

Bibliographic references

Includes bibliographical references.

Source of description

Description based on print version record; resource not viewed.

Rights and reproductions note

Creative Commons Attribution 4.0 International

Language note

English

Contents

• Cover
• FIGURES
• ABBREVIATIONS AND ACRONYMS
• ACKNOWLEDGEMENTS
• 1 INTRODUCTION
• 2 ARGENTINA'S STABILISATION CHALLENGE
• 2.1 PRECEDING STABILISATION ATTEMPTS SINCE THE DAYS OF PERÓN
• 2.2 HIGH AND HYPERINFLATION IN ARGENTINA IN THE 1980s
• 2.2.1 Rising Money Stock
• 2.2.2 Government Finance
• 2.2.2.1 Inflationary Bias of Governments
• 2.2.2.2 Debt Structure
• 2.2.2.3 Are Budget Deficits a Cause or a Consequence of Inflation?
• 2.2.2.4 Erosion of Tax System
• 2.2.2.5 Lack of Structured Budgeting Process
• 2.2.2.6 Inflation Tax
• 2.2.3 Monetary Regime
• 2.2.3.1 Monetary Constitution
• 2.2.3.2 Monetary Policy
• 2.2.4 Inflation Expectations
• 2.2.5 Symptoms of High Inflation
• 2.2.5.1 Decreasing Demand for Real Money Stock
• 2.2.5.2 Currency Substitution
• 2.2.5.3 Undervaluation as a Consequence of Currency Substitution
• 2.2.5.4 Acceleration and Variability of Inflation
• 2.2.5.5 Real Price and Wage Variability
• 2.2.5.6 Distortion and Excess Variability of Relative Prices
• 2.2.5.7 Contracting Strategies
• 2.2.5.8 Disappearance of Markets
• 2.2.5.9 Economic Performance
• 2.2.5.10 External Trade
• 2.2.5.11 Distributional Effects of High Inflation
• 2.2.6 From High to Hyperinflation
• 2.3 OPTIONS FOR STABILISATION IN THE BEGINNING 1990s
• 2.3.1 Political Feasibility of Reforms
• 2.3.2 Shape of Reforms Ending Hyperinflation
• 2.3.2.1 Monetary and Fiscal Reform
• 2.3.2.2 External Anchor: Fixing the Exchange Rate
• 2.3.3 Argentina's Choice
• 3 STABILISATION VIA CURRENCY BOARD
• 3.1 THE CURRENCY BOARD IDEA
• 3.1.1 The Term
• 3.1.2 The Concept
• 3.1.3 Currency Board vs. Other Fixed Exchange Rate Arrangements
• 3.1.4 Currency Board vs. Central Bank
• 3.1.5 Excursus: Doctrinal History and the Currency Board Idea
• 3.1.5.1 Doctrinal Positions: Mercantilist vs. Classical Views.
• 3.1.5.2 The Bullionist and Banking-Currency Controversies
• The Early 19th Century Bullionist Controversy
• The 1840s Banking-Currency Controversy
• Findings with Hindsight
• 3.1.5.3 The Currency Board and Classical Monetary Theory
• 3.1.5.4 From Colonial to Present-Day Currency Boards
• Rationale of Colonial Currency Boards
• Currency Boards Since 1849
• 3.2 THE SPECIFICS AND FUNCTIONING OF A CURRENCY BOARD
• 3.2.1 Constitutional Elements of a Currency Board
• 3.2.1.1 Anchor Currency
• 3.2.1.2 Fixed Exchange Rate
• 3.2.1.3 Full Convertibility
• 3.2.1.4 Conduct of Monetary Policy
• Control of Private Money Creation
• Clearing and Day-to-Day Monetary Operations
• Lender of Last Resort Function
• 3.2.1.5 Conduct of Fiscal Policy
• 3.2.1.6 Institutional Preconditions
• 3.2.2 Strengths and Weaknesses of a Currency Board
• 3.2.2.1 Strengths of a Currency Board
• Simplicity and Transparency
• Credibility
• Currency Stability
• Interest Rate Convergence
• Financial Intermediation
• 3.2.2.2 Weaknesses of a Currency Board
• Nominal Exchange Rate Rigidity and Exchange Rate Misalignments
• Financial Fragility in the Absence of a Lender of Last Resort
• Loss of Other Central Bank Functions
• Constraints on Fiscal Policy
• 3.2.3 Considerations for Adopting a Currency Board
• 3.2.3.1 When is a Currency Board an Appropriate Choice?
• 3.2.3.2 Implementation of a Currency Board
• 3.2.4 Duration and Termination of a Currency Board
• 3.2.4.1 Currency Board: Permanent or Transitional Arrangement?
• 3.2.4.2 Exit Options
• Built-in Escape Clauses
• Depreciation
• Appreciation
• Switch to a Floating Exchange Rate
• Switch in the Peg
• 3.2.5 Dual Currency Boards: An Extended Proposal for Currency Stability
• 4 THE ARGENTINE CURRENCY BOARD ARRANGEMENT
• 4.1 FEATURES AND IMPLEMENTATION OF THE ARGENTINE CBA
• 4.1.1 The Legal Fixing.
• 4.1.1.1 The Convertibility Law
• 4.1.1.2 The New Central Bank Law
• 4.1.2 Assessment of the Argentine CBA's Configuration
• 4.1.2.1 Orthodox and Non-Orthodox Elements
• 4.1.2.2 The Choice of the Anchor and the Rate
• 4.1.2.3 Suboptimal Currency Area
• 4.2 THE STABILISATION TRACK DURING THE 1990s
• 4.2.1 The Early 1990s' Economic Reforms
• 4.2.1.1 Further Reforms Shaping the Monetary Frame
• 4.2.1.2 Brady Restructuring
• 4.2.1.3 Tax Reforms
• 4.2.1.4 Federal Fiscal Relations
• 4.2.1.5 Privatisation and Deregulation
• 4.2.1.6 Financial Sector Reform
• 4.2.1.7 Social Security Reform
• 4.2.1.8 Labour Market Reforms
• 4.2.1.9 Trade Liberalisation
• 4.2.2 The Early 1990s' Economic Performance: 1991-1994
• 4.2.2.1 Monetary and Financial Development
• 4.2.2.2 Economic Activity
• 4.2.2.3 Fiscal Development
• 4.2.2.4 Unemployment and Income Distribution
• 4.2.3 Coping with the Tequila Crisis: 1995
• 4.2.3.1 The Tequila Effect
• 4.2.3.2 Currency and Bank Run
• 4.2.3.3 Managing the Crisis
• 4.2.3.4 Financial Sector Reforms in the Wake of Tequila
• 4.2.3.5 Fiscal Adjustment Following Tequila
• 4.2.4 The Second Expansionary Phase after Tequila: 1996-1998
• 4.2.5 The Late 1990s' Recession: 1999-2001
• 4.2.5.1 The Asian, Russian, and Brazilian Crises
• 4.2.5.2 More Adverse External Shocks
• 4.2.5.3 Recession cum Deflation
• 4.2.5.4 Real Appreciation of the Peso
• 4.2.5.5 Fiscal Atrophy
• 4.2.5.6 Limited Financial Sector Robustness
• 4.2.5.7 Further Labour Market Reforms
• 4.2.6 The Run Up to the Collapse: 2001
• 4.2.6.1 Meddling with the CBA
• 4.2.6.2 Emission of Quasi-Monies
• 4.2.6.3 Social and Political Overflow, and the End of the CBA
• 4.2.7 A Sketch of the Post-Collapse
• 5 WHAT WENT WRONG?
• 5.1 THE MAIN SUSPECTS
• 5.1.1 Fiscal Imbalance
• 5.1.1.1 Persistent Budget Deficits
• 5.1.1.2 Total Indebtedness.
• 5.1.2 Overvalued Exchange Rate
• 5.1.2.1 Real Appreciation before 1998
• 5.1.2.2 The Real Exchange Rate after 1998
• 5.1.3 Sudden Stop
• 5.1.3.1 Leveraged Argentina
• 5.1.3.2 Debt Sustainability
• 5.1.3.3 The Sudden Stop in the Region
• 5.1.4 Shock Exacerbation within MERCOSUR
• 5.1.4.1 1994-1998: Fixed Here, Fixed plus Sterilisation There
• 5.1.4.2 1999-2001: Fixed Here, Floating plus Sterilisation There
• 5.1.4.3 Exposed within MERCOSUR
• 5.1.5 Institutional Defects
• 5.1.5.1 Insufficient Labour Market Reforms
• 5.1.5.2 Insufficient Diversification of Production
• 5.1.5.3 Banking Sector Reforms Impaired
• 5.1.5.4 Other Deficient Reforms
• 5.1.6 Politics
• 5.1.7 The IMF
• 5.1.7.1 The IMF and the CBA
• 5.1.7.2 Outline of the IMF's Engagement 1991-2001
• 5.1.7.3 The Role of the IMF during 1991 to 2000
• 5.1.7.4 The Role of the IMF in the Crisis
• 5.1.7.5 The Fund's Responsibilities
• 5.1.8 The Washington Consensus
• 5.1.9 The Currency Board Itself
• 5.2 TAKING STOCK
• 5.2.1 Vulnerability
• 5.2.2 Triggers
• 5.3 MISSED OPPORTUNITIES?
• 5.3.1 Soft Exit during 1993/1994
• 5.3.2 Soft Exit during the Second Expansionary Phase
• 5.3.3 Hard Exit after the External Shocks of the Late Nineties
• 5.3.4 Exit towards Full Dollarisation until 1999
• 5.3.5 Dollarisation in the Midst of Crisis
• 6 CONCLUSION
• Some Lessons
• Argentina's New Challenge
• BIBLIOGRAPHY
• STATISTICAL APPENDIX
• Macro Indicators
• Financial and Banking Indicators
• Fiscal Indicators
• Distribution and Poverty Indicators
• Selected Data.

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Other format(s)

Also available in print form.

ISBN

3-631-75447-7

Doi

• 10.3726/b13965

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