Working Paper: NBER ID: w15478
Authors: Graciela Kaminsky; Amine Mati; Nada Choueiri
Abstract: This paper examines Argentina's currency crises from 1970 to 2001, with particular attention to the role of domestic and external factors. Using VAR estimations, we find that deteriorating domestic fundamentals matter. For example, at the core of the late 1980s crises was excessively loose monetary policy while a sharp output contration triggered the collapse of the currency board in January 2002. In contrast, adverse external shocks were at the heart of the 1995 crisis, with spillovers from the Mexican crisis and high world interest rates being key sources of financial distress.
Keywords: currency crises; Argentina; external shocks; domestic fragility
JEL Codes: F3; F30; F32; F34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Deteriorating domestic fundamentals (F31) | Currency crises (F31) |
| Excessively loose monetary policy (E52) | Currency crises (F31) |
| Adverse external shocks (F69) | Currency crises (F31) |
| Spillovers from the Mexican crisis (F65) | Currency crises (F31) |
| High world interest rates (E43) | Currency crises (F31) |
| Sharp contraction in output (E32) | Collapse of the currency board (F31) |
| Buildup of fragility (F12) | Currency crises (F31) |
| Domestic credit cycles (E32) | Buildup of fragility (F12) |
| Fiscal problems (E62) | Buildup of fragility (F12) |
| Shocks to economic activity (E32) | Buildup of fragility (F12) |