Five years of competitive and stable real exchange rate in Argentina, 2002-2007

Roberto Frenkel and Martin Rapetti

International Review of Applied Economics, 2008, vol. 22, issue 2, 215-226

Abstract: We argue that the macroeconomic regime focused on the preservation of a stable and competitive real exchange rate (SCRER) has been a key factor explaining the rapid growth experienced in Argentina during 2002-2007. This policy promoted economic growth not only by preserving external and fiscal accounts sustainability, but also by providing incentives to the tradable sector and thus encouraging the expansion of its production, employment and investment. Monetary and exchange rate policies aimed at preserving a SCRER collide with conventional wisdom, particularly with the open economy trilemma. We argue that the critiques based on the trilemma may fail to hold in situations of excess supply of foreign currency and analyze the conditions under which the SCRER policy is sustainable.

Keywords: real exchange rate; growth; monetary policy; trilemma; Argentina (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (28)

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DOI: 10.1080/02692170701880734

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