Argentina's fixed exchange rate and high external debt led to a large current account deficit and international uncertainty over the solvency of the peso. This culminated in a debt default, elimination of the fixed exchange rate, and economic contraction.
Argentina's fixed exchange rate and high external debt led to a large current account deficit and international uncertainty over the solvency of the peso. This culminated in a debt default, elimination of the fixed exchange rate, and economic contraction.
Argentina's fixed exchange rate and high external debt led to a large current account deficit and international uncertainty over the solvency of the peso. This culminated in a debt default, elimination of the fixed exchange rate, and economic contraction.
The Causes of Argentinas 2002 Fiscal Crisis Argentine Economy in the 1990s Commodity-based Net exporter of oil Agricultural products Susceptible to market shocks
Implemented liberal market reforms Privatized oil Deficit spending
Thesis Argentinas fixed exchange rate and high external debt led to a large current account deficit and international uncertainty over the solvency of the peso.
This culminated in a debt default, elimination of the fixed exchange rate, and economic contraction. Fixed Exchange Rate Overvalues the Peso
1997-2001: Current account deficit grows by $30 billion Argentine exports are more expensive Grossly overvalued peso 1991: Minister of Economy Domingo Cavallo pegs peso to dollar at 1:1 Argentinas Current Account Deficit 1992-2003
External Debt Quickly Accumulates Interest payments exceeds budget surplus by 2% for 10 years
Effects on the Argentine Economy Economy contracts by 28%
Unemployment reaches 20%
Fixed exchange rate is abandoned
Gini coefficient grew from 2001 to 2005 Summary of the Crisis High external debt and fixed exchange rate Negative net exports and investor confidence Debt default and economic contraction