Argentina’s currency board: what keep them together?

Carol Wise ()

Brazilian Journal of Political Economy, 2001, vol. 21, issue 3, 537-564

Abstract: As the one Latin American emerging market country that has steadfastly adhered to a fixed exchange rate for more than a decade, this article examines the economic and political trade-offs that peso-dollar parity has entailed. In economic terms, the currency board has clearly fostered macroeconomic stability and fiscal prudence. Yet, the maintenance of a fixed currency regime in the context of volatile capital flows has also contributed to the steady appreciation of the peso over time. This trend, along with certain political deals (slow labor market reform and generous government transfers to the provinces) struck at the outset of the reform program, has greatly hampered the productivity and dynamism of the Argentine economy. The country’s weak competitive position has been exacerbated by the Brazilian devaluation of 1999, and the lesson since then has been how difficult it is to craft a political coalition to tackle the formidable microeconomic tasks now at hand. JEL Classification: F31; F33.

Keywords: Currency board; dollarization; inflation (search for similar items in EconPapers)
Date: 2001
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