Living and Dying with Hard Pegs : The Rise and Fall of Argentina's Currency Board
The rise and fall of Argentina's currency board shows the extent to which the advantages of hard pegs have been overstated. The currency board did provide nominal stability and boosted financial intermediation, at the cost of endogenous financ...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2003/03/2166846/living-dying-hard-pegs-rise-fall-argentinas-currency-board http://hdl.handle.net/10986/19040 |
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okr-10986-190402021-04-23T14:03:42Z Living and Dying with Hard Pegs : The Rise and Fall of Argentina's Currency Board De la Torre, Augusto Levy Yeyati, Eduardo Schmukler, Sergio L. AFFILIATES AGGREGATE DEMAND ARGENTINE PESO ASSET SUBSTITUTION BAD LOANS BALANCE SHEET BALANCE SHEETS BANK ACCOUNTS BANK ASSETS BANK DEPOSITS BANK FAILURES BANK REGULATION BANK RISK BANK RUN BANKING CRISIS BANKING SECTOR BANKING SYSTEM BANKRUPTCY BANKS BENCHMARK BRAZILIAN REAL CAPITAL FLOWS CAPITAL INFLOWS CAPITAL REQUIREMENTS CENTRAL BANK CENTRAL BANK AS LENDER CLOSED ECONOMY CONSOLIDATION CONTAGION CONVERTIBILITY COST OF CAPITAL COUNTRY RISK CREDIT RISK CREDITOR CREDITOR RIGHTS CURRENCY CURRENCY BOARD CURRENCY BOARDS CURRENCY CRISIS CURRENCY MISMATCH CURRENCY OF DENOMINATION CURRENCY RISK CURRENCY SUBSTITUTION CURRENT ACCOUNT DEBT DEBT SERVICE DEFAULT RISK DEMAND DEPOSITS DEREGULATION DEVALUATION DOLLAR DEPOSITS DOMESTIC CURRENCY DOMESTIC MARKETS EMERGING ECONOMIES EURO EXCHANGE RATE EXCHANGE RATE ADJUSTMENTS EXCHANGE RATE FLEXIBILITY EXCHANGE RATE REGIME EXCHANGE RATE REGIMES EXCHANGE RATE RISK EXPORTS EXTERNAL DEBT EXTERNAL SHOCKS FINANCIAL ASSETS FINANCIAL CONTRACTS FINANCIAL CRISIS FINANCIAL DEEPENING FINANCIAL INSTABILITY FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SYSTEM FINANCIAL TRANSACTIONS FISCAL SPENDING FISCAL SURPLUS FISCAL SUSTAINABILITY FLOATING MONEY FOREIGN BANKS FOREIGN CURRENCY FOREIGN EXCHANGE FOREIGN EXCHANGE RISK GDP GOVERNMENT BONDS GOVERNMENT DEBT INCOME INDIVIDUAL BANK INFLATION INTEREST RATE INTEREST RATES INTERMEDIATION INTERNATIONAL CURRENCY INTERNATIONAL RESERVES LABOR MARKETS LENDER OF LAST RESORT LIQUIDITY LOAN CLASSIFICATION LOAN PORTFOLIO MACROECONOMICS MARGINAL COST MATURITIES MORTGAGE LOANS MULTIPLE EQUILIBRIA NOMINAL DEVALUATION NOMINAL EXCHANGE RATE NOMINAL FLEXIBILITY OPEN ECONOMIES OVERVALUATION PEGS PESOS PRIVATE BANKS PROPERTY RIGHTS PUBLIC DEBT RATING AGENCIES REAL EXCHANGE RATE REGULATORY FRAMEWORK RESERVE REQUIREMENTS REVALUATION SAVINGS SAVINGS DEPOSITS SOLVENCY STORE OF VALUE TAX REFORM TIME DEPOSITS TRANSPARENCY TREASURY TREASURY BONDS UNEMPLOYMENT WAGES CURRENCY BOARDS MONETARY LAW MONETARY POLICY POLITICAL ASPECTS CURRENCY DEVALUATION CURRENCY FLUCTUATION CURRENCY ISSUANCE CURRENCY REPEGS EXCHANGE RATE INSTABILITY EXCHANGE RATE ADJUSTMENTS DOLLAR STANDARD FLOATING EXCHANGE RATES CURRENCY MARKETS CONVERTIBILITY DEPOSIT-REFUND SYSTEM INTEREST RATES PESO ARGENTINO DEMAND DEPOSITS SAVINGS BANKING REFORM WAGES The rise and fall of Argentina's currency board shows the extent to which the advantages of hard pegs have been overstated. The currency board did provide nominal stability and boosted financial intermediation, at the cost of endogenous financial dollarization, but did not foster monetary or fiscal discipline. The failure to adequately address the currency-growth-debt trap into which Argentina fell at the end of the 1990s precipitated a run on the currency and the banks, followed by the abandonment of the currency board and a sovereign debt default. The crisis can be best interpreted as a bad outcome of a high-stakes strategy to overcome a weak currency problem. To increase the credibility of the hard peg, the government raised its exit costs, which deepened the crisis once exit could no longer be avoided. But some alternative exit strategies would have been less destructive than the one adopted. 2014-07-29T14:52:57Z 2014-07-29T14:52:57Z 2003-03 http://documents.worldbank.org/curated/en/2003/03/2166846/living-dying-hard-pegs-rise-fall-argentinas-currency-board http://hdl.handle.net/10986/19040 English en_US Policy Research Working Paper;No. 2980 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Latin America & Caribbean |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
AFFILIATES AGGREGATE DEMAND ARGENTINE PESO ASSET SUBSTITUTION BAD LOANS BALANCE SHEET BALANCE SHEETS BANK ACCOUNTS BANK ASSETS BANK DEPOSITS BANK FAILURES BANK REGULATION BANK RISK BANK RUN BANKING CRISIS BANKING SECTOR BANKING SYSTEM BANKRUPTCY BANKS BENCHMARK BRAZILIAN REAL CAPITAL FLOWS CAPITAL INFLOWS CAPITAL REQUIREMENTS CENTRAL BANK CENTRAL BANK AS LENDER CLOSED ECONOMY CONSOLIDATION CONTAGION CONVERTIBILITY COST OF CAPITAL COUNTRY RISK CREDIT RISK CREDITOR CREDITOR RIGHTS CURRENCY CURRENCY BOARD CURRENCY BOARDS CURRENCY CRISIS CURRENCY MISMATCH CURRENCY OF DENOMINATION CURRENCY RISK CURRENCY SUBSTITUTION CURRENT ACCOUNT DEBT DEBT SERVICE DEFAULT RISK DEMAND DEPOSITS DEREGULATION DEVALUATION DOLLAR DEPOSITS DOMESTIC CURRENCY DOMESTIC MARKETS EMERGING ECONOMIES EURO EXCHANGE RATE EXCHANGE RATE ADJUSTMENTS EXCHANGE RATE FLEXIBILITY EXCHANGE RATE REGIME EXCHANGE RATE REGIMES EXCHANGE RATE RISK EXPORTS EXTERNAL DEBT EXTERNAL SHOCKS FINANCIAL ASSETS FINANCIAL CONTRACTS FINANCIAL CRISIS FINANCIAL DEEPENING FINANCIAL INSTABILITY FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SYSTEM FINANCIAL TRANSACTIONS FISCAL SPENDING FISCAL SURPLUS FISCAL SUSTAINABILITY FLOATING MONEY FOREIGN BANKS FOREIGN CURRENCY FOREIGN EXCHANGE FOREIGN EXCHANGE RISK GDP GOVERNMENT BONDS GOVERNMENT DEBT INCOME INDIVIDUAL BANK INFLATION INTEREST RATE INTEREST RATES INTERMEDIATION INTERNATIONAL CURRENCY INTERNATIONAL RESERVES LABOR MARKETS LENDER OF LAST RESORT LIQUIDITY LOAN CLASSIFICATION LOAN PORTFOLIO MACROECONOMICS MARGINAL COST MATURITIES MORTGAGE LOANS MULTIPLE EQUILIBRIA NOMINAL DEVALUATION NOMINAL EXCHANGE RATE NOMINAL FLEXIBILITY OPEN ECONOMIES OVERVALUATION PEGS PESOS PRIVATE BANKS PROPERTY RIGHTS PUBLIC DEBT RATING AGENCIES REAL EXCHANGE RATE REGULATORY FRAMEWORK RESERVE REQUIREMENTS REVALUATION SAVINGS SAVINGS DEPOSITS SOLVENCY STORE OF VALUE TAX REFORM TIME DEPOSITS TRANSPARENCY TREASURY TREASURY BONDS UNEMPLOYMENT WAGES CURRENCY BOARDS MONETARY LAW MONETARY POLICY POLITICAL ASPECTS CURRENCY DEVALUATION CURRENCY FLUCTUATION CURRENCY ISSUANCE CURRENCY REPEGS EXCHANGE RATE INSTABILITY EXCHANGE RATE ADJUSTMENTS DOLLAR STANDARD FLOATING EXCHANGE RATES CURRENCY MARKETS CONVERTIBILITY DEPOSIT-REFUND SYSTEM INTEREST RATES PESO ARGENTINO DEMAND DEPOSITS SAVINGS BANKING REFORM WAGES |
| spellingShingle |
AFFILIATES AGGREGATE DEMAND ARGENTINE PESO ASSET SUBSTITUTION BAD LOANS BALANCE SHEET BALANCE SHEETS BANK ACCOUNTS BANK ASSETS BANK DEPOSITS BANK FAILURES BANK REGULATION BANK RISK BANK RUN BANKING CRISIS BANKING SECTOR BANKING SYSTEM BANKRUPTCY BANKS BENCHMARK BRAZILIAN REAL CAPITAL FLOWS CAPITAL INFLOWS CAPITAL REQUIREMENTS CENTRAL BANK CENTRAL BANK AS LENDER CLOSED ECONOMY CONSOLIDATION CONTAGION CONVERTIBILITY COST OF CAPITAL COUNTRY RISK CREDIT RISK CREDITOR CREDITOR RIGHTS CURRENCY CURRENCY BOARD CURRENCY BOARDS CURRENCY CRISIS CURRENCY MISMATCH CURRENCY OF DENOMINATION CURRENCY RISK CURRENCY SUBSTITUTION CURRENT ACCOUNT DEBT DEBT SERVICE DEFAULT RISK DEMAND DEPOSITS DEREGULATION DEVALUATION DOLLAR DEPOSITS DOMESTIC CURRENCY DOMESTIC MARKETS EMERGING ECONOMIES EURO EXCHANGE RATE EXCHANGE RATE ADJUSTMENTS EXCHANGE RATE FLEXIBILITY EXCHANGE RATE REGIME EXCHANGE RATE REGIMES EXCHANGE RATE RISK EXPORTS EXTERNAL DEBT EXTERNAL SHOCKS FINANCIAL ASSETS FINANCIAL CONTRACTS FINANCIAL CRISIS FINANCIAL DEEPENING FINANCIAL INSTABILITY FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SYSTEM FINANCIAL TRANSACTIONS FISCAL SPENDING FISCAL SURPLUS FISCAL SUSTAINABILITY FLOATING MONEY FOREIGN BANKS FOREIGN CURRENCY FOREIGN EXCHANGE FOREIGN EXCHANGE RISK GDP GOVERNMENT BONDS GOVERNMENT DEBT INCOME INDIVIDUAL BANK INFLATION INTEREST RATE INTEREST RATES INTERMEDIATION INTERNATIONAL CURRENCY INTERNATIONAL RESERVES LABOR MARKETS LENDER OF LAST RESORT LIQUIDITY LOAN CLASSIFICATION LOAN PORTFOLIO MACROECONOMICS MARGINAL COST MATURITIES MORTGAGE LOANS MULTIPLE EQUILIBRIA NOMINAL DEVALUATION NOMINAL EXCHANGE RATE NOMINAL FLEXIBILITY OPEN ECONOMIES OVERVALUATION PEGS PESOS PRIVATE BANKS PROPERTY RIGHTS PUBLIC DEBT RATING AGENCIES REAL EXCHANGE RATE REGULATORY FRAMEWORK RESERVE REQUIREMENTS REVALUATION SAVINGS SAVINGS DEPOSITS SOLVENCY STORE OF VALUE TAX REFORM TIME DEPOSITS TRANSPARENCY TREASURY TREASURY BONDS UNEMPLOYMENT WAGES CURRENCY BOARDS MONETARY LAW MONETARY POLICY POLITICAL ASPECTS CURRENCY DEVALUATION CURRENCY FLUCTUATION CURRENCY ISSUANCE CURRENCY REPEGS EXCHANGE RATE INSTABILITY EXCHANGE RATE ADJUSTMENTS DOLLAR STANDARD FLOATING EXCHANGE RATES CURRENCY MARKETS CONVERTIBILITY DEPOSIT-REFUND SYSTEM INTEREST RATES PESO ARGENTINO DEMAND DEPOSITS SAVINGS BANKING REFORM WAGES De la Torre, Augusto Levy Yeyati, Eduardo Schmukler, Sergio L. Living and Dying with Hard Pegs : The Rise and Fall of Argentina's Currency Board |
| geographic_facet |
Latin America & Caribbean |
| relation |
Policy Research Working Paper;No. 2980 |
| description |
The rise and fall of Argentina's
currency board shows the extent to which the advantages of
hard pegs have been overstated. The currency board did
provide nominal stability and boosted financial
intermediation, at the cost of endogenous financial
dollarization, but did not foster monetary or fiscal
discipline. The failure to adequately address the
currency-growth-debt trap into which Argentina fell at the
end of the 1990s precipitated a run on the currency and the
banks, followed by the abandonment of the currency board and
a sovereign debt default. The crisis can be best interpreted
as a bad outcome of a high-stakes strategy to overcome a
weak currency problem. To increase the credibility of the
hard peg, the government raised its exit costs, which
deepened the crisis once exit could no longer be avoided.
But some alternative exit strategies would have been less
destructive than the one adopted. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
De la Torre, Augusto Levy Yeyati, Eduardo Schmukler, Sergio L. |
| author_facet |
De la Torre, Augusto Levy Yeyati, Eduardo Schmukler, Sergio L. |
| author_sort |
De la Torre, Augusto |
| title |
Living and Dying with Hard Pegs : The Rise and Fall of Argentina's Currency Board |
| title_short |
Living and Dying with Hard Pegs : The Rise and Fall of Argentina's Currency Board |
| title_full |
Living and Dying with Hard Pegs : The Rise and Fall of Argentina's Currency Board |
| title_fullStr |
Living and Dying with Hard Pegs : The Rise and Fall of Argentina's Currency Board |
| title_full_unstemmed |
Living and Dying with Hard Pegs : The Rise and Fall of Argentina's Currency Board |
| title_sort |
living and dying with hard pegs : the rise and fall of argentina's currency board |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2003/03/2166846/living-dying-hard-pegs-rise-fall-argentinas-currency-board http://hdl.handle.net/10986/19040 |
| _version_ |
1764439334631505920 |