The New Millennium Argentine Saga: From Crisis to Success and from Success to Failure
Argentina’s economic performance, since the beginning of the new millennium, has been an object of analysis and intense debate. This is not surprising. The period began with a severe financial and debt crisis. In December 2001, the government announced the largest default on public debt in global financial history. The economy had also sunk into a deep depression: GDP contracted by more than 20% compared to its previous peak in mid-1998, unemployment reached almost 22% of the labor force and half of the population became poor. Rather unexpectedly for most observers, the economy began a rapid and strong recovery in mid-2002, which then turned into rapid and strong economic growth. During this process, employment grew very fast, many tradable services, manufacturing and agricultural activities boomed and non-traditional exports expanded at an unseeing pace. The impact of the global financial crisis of 2008–09 was short-lived and not as severe as in other emerging markets. However, by late 2011, despite the very favorable external context of low interest rates and high terms of trade, the economy started to be constrained by the lack of foreign exchange. In early 2014, it finally faced a balance of payments crisis. As a result, inflation accelerated and output and employment contracted. The full resolution and consequences of this crisis are — at the time we write these lines — still to be seen.
KeywordsExchange Rate Central Bank Real Exchange Rate Real Wage Consumer Price Index
Unable to display preview. Download preview PDF.
- Damill, M., R. Frenkel and M. Rapetti (2010) ‘The Argentinian Debt: History, Default, and Restructuring’, in B. Herman, J.A. Ocampo and S. Spiegel (eds) Overcoming Developing Country Debt Crises (Oxford University Press).Google Scholar
- Frenkel, R. (2007) ‘The Sustainability of Monetary Sterilization Policies’, Cepal Review 93, December: 29–36.Google Scholar
- Frenkel, R. (2008) ‘The Competitive Real Exchange-rate Regime, Inflation and Monetary Policy’, Cepal Review 96, December: 191–201.Google Scholar
- Levy Yeyati, E. and F. Sturzenegger (2007) ‘Fear of Floating in Reverse: Exchange Rate Policy in the 2000s’, unpublished manuscript (Washington: World Bank).Google Scholar
- Polterovich, V. and V. Popov (2002) ‘Accumulation of Foreign Exchange Reserves and Long Term Growth’, unpublished paper (Moscow: New Economic School).Google Scholar
- Prasad, E., R. Rajan and A. Subramanian (2007) ‘Foreign Capital and Economic Growth’, Brookings Papers on Economic Activity (1): 153–230.Google Scholar
- Rodrik, D. (2008) ‘The Real Exchange Rate and Economic Growth’, Brookings Papers on Economic Activity (2): 365–412.Google Scholar