https://en.wikipedia.org/wiki/Convertibility_plan?(Links to an external site.)http://www.imf.org/external/pubs/ft/fandd/1998/12/enoch.htm?(Links to an external site.)https://www.yahoo.com/news/sharp-devaluation-argentine-peso-dollar-142332669.html?ref=gs?(Links to an external site.)
As we have discussed in class, Argentina is an interesting case study as it has experienced a number of extreme governmental policies and regimes regarding (hyper)inflation, foreign exchange rate pegs and currency controls over the last 50 years. ?Please refer to the articles above as background and answer the following questions. ?Obviously, you are free to look at other articles as there has been quite a bit written about Argentina.1. ?What were the "costs" to Argentina (its economy and citizens) of the high and variable inflation that existed prior to 1990? ?Who were possible winners and losers?2. ?If everyone agrees that hyperinflation is bad, why does it exist? ?Could the possibility of hyperinflation be reduced by having an independent central bank, not elected by the citizens?3. ?What are the major advantages of a currency board system in establishing anti-inflationary credibility? ?Why is credibility so important?4. ?What are the potential weaknesses/flaws of a currency board system? ?What led to its downfall in Argentina in 2002?5. ?In an attempt to reduce inflation and partially stabilize exchange rates, a "dual" exchange rate system (one official, and the other in effect on a black market) was in place for many years. ?Please describe how this worked, why it was allowed/encouraged by the government, and why it ultimately failed (converging to only one exchange rate) in late 2015.
Running head: ARGENTINE INFLATION 1 Convertibility Plan
In the years between 1980-1990, Argentina was deep in a financial crisis. It was facing a
hyperinflation which was prompting...
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