Abstract
The purpose of this article is twofold. The first is to explain the time inconsistencies of the convertibility regime that led to the 2001 crisis. The argument suggests that the credibility requirements for convertibility induced a dynamic of legal, fiscal, financial and external commitments that increased exit costs and time inconsistencies. The second objective is to explain the tensions of the floating regime that replaced convertibility in 2002. We describe the effects of a floating exchange rate on macroeconomic imbalance and the growing tension between competitiveness and inflation.
Highlights
This purpose of this article is to explain the inconsistencies that led to the crisis of the Argentine convertibility regime (1991-2001) and the tensions of the managed floating regime that replaced it in 2002
We show that the performance of the institutional arrangement for the managed floating system corrected the inconsistencies caused by convertibility, and we show the contrast between the new post-convertibility equilibrium – its rules, incentives, results and risks – and the currency board regime experience
Two elements allowed the government to maintain a managed flotation oriented towards competitiveness (MFC) with relative effectiveness: a strong capacity of influence over the Central Bank and the launch of a mechanism to absorb the portion of monetary issue susceptible of putting the annual inflation goals at risk
Summary
O primeiro é explicar as inconsistências do regime de conversibilidade que levaram à crise de 2001. O segundo objetivo é explicar as tensões do regime flutuante que substituiu a conversibilidade em 2002. Nós descrevemos os efeitos de uma taxa de câmbio flutuante em desequilíbrio macroeconômico e a crescente tensão entre a competitividade e a inflação. Palavras-chave: Política econômica; crise da taxa de câmbio; convertibilidade; Argentina. The first is to explain the time inconsistencies of the convertibility regime that led to the 2001 crisis. The second objective is to explain the tensions of the floating regime that replaced convertibility in 2002. We describe the effects of a floating exchange rate on macroeconomic imbalance and the growing tension between competitiveness and inflation.
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