Argentina: A decade of the Convertibility Regime

Abstract

This article is an assessment of the Convertibility period in Argentina, which covered the nineties. It is presented in two sections. In the first section macroeconomic performance is described and evaluated, together with the effects on employment, unemployment and income distribution. An important contraction in full employment and significant increments in unemployment and involuntary underemployment are stressed. As from the mid-nineties, income distribution shows a strong worsening trend and the poverty and indigence indicators tend to rise. The increment in unemployment stands as the main explanatory factor of the worsening of social conditions. In the second section different aspects of the Convertibility Regime are discussed: the appreciated exchange rate, the dollarization of the financial system, the accentuated dependency on capital flows, the external sustainability and the regime durability.

Short- And Long-Run Effects of Devaluations: Evidence From Argentina

“…As shown in Figure 6, nominal shocks gained prominence during these turbulent years. After the hyperinflation of the 1980s, the country applied a tough currency board (the Convertibility Plan), that started as a poster child because of its macroeconomic stability and investment boom, but ended up as a basket case because of the high unemployment, rise in inequality and social unrest, as noted by Edwards (2002) and Frenkel (2002). The aftermath was the debt default and the huge devaluation of 2002.…”