Publication:
Tango with the Gringo: the Hard Peg and Real Misalignment in Argentina

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dc.contributor.authorAlberola, Enrique
dc.contributor.authorLópez, Humberto
dc.contributor.authorServén, Luis
dc.date.accessioned2013-06-19T16:14:35Z
dc.date.available2013-06-19T16:14:35Z
dc.date.issued2004-06
dc.description.abstractBetween 1990 and 2001 the Argentine peso appreciated by 80 percent in real terms, and its overvaluation has been singled out as one of the main suspects in the debate on the causes of the Argentina collapse of late 2001. This paper assesses the degree of real misalignment in Argentina over the Convertibility period using a model in which the equilibrium real exchange rate is defined as the value consistent with (i) a balance of payments position where any current account imbalance is financed by a sustainable flow of international capital (external equilibrium), and (ii) traded/nontraded sector productivity differentials (internal equilibrium). Empirical implementation of the model suggests that the initial real appreciation of the peso, between 1990 and 1993, was consistent with the productivity increases that Argentina enjoyed following the stabilization of the economy after the hyperinflation of the late 1980s. But after 1996 a widening gap opened between the observed real exchange rate and that consistent with a sustainable net foreign asset position. Our estimates indicate that in 2001 the peso was overvalued by over 50 percent. The model allows us to assess how much of the overvaluation resulted from Argentina's inadequate choice of anchor currency and how much from a divergence of fundamentals between the U.S. and Argentina, ultimately due to the maintenance of policies inconsistent with the peg. We find that both factors played a role in the overvaluation accumulated between 1977 and 2001 that preceded the collapse of the Convertibility regime.en
dc.identifierhttp://documents.worldbank.org/curated/en/2004/06/4980119/tango-gringo-hard-peg-real-misalignment-argentina
dc.identifier.doi10.1596/1813-9450-3322
dc.identifier.urihttps://hdl.handle.net/10986/14004
dc.languageEnglish
dc.language.isoen_US
dc.publisherWorld Bank, Washington, D.C.
dc.relation.ispartofseriesPolicy Research Working Paper;No.3322
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectADJUSTMENT PROGRAMS
dc.subjectALLOCATION OF RESOURCES
dc.subjectARGENTINE PESO
dc.subjectASSETS
dc.subjectBALANCE OF PAYMENTS
dc.subjectBASKET OF GOODS
dc.subjectBENCHMARK
dc.subjectBILATERAL TRADE
dc.subjectBRAZILIAN REAL
dc.subjectCAPITAL ACCOUNT
dc.subjectCAPITAL FLOWS
dc.subjectCOMPETITIVENESS
dc.subjectCONSUMER PRICE INDEX
dc.subjectCONVERTIBILITY
dc.subjectCPI
dc.subjectCURRENCY BOARD
dc.subjectCURRENT ACCOUNT
dc.subjectCURRENT ACCOUNT BALANCE
dc.subjectDEFLATION
dc.subjectDEMOGRAPHICS
dc.subjectDEVALUATION
dc.subjectECONOMISTS
dc.subjectELASTICITY
dc.subjectEMPIRICAL EVIDENCE
dc.subjectEQUILIBRIUM
dc.subjectEURO
dc.subjectEXCHANGE MARKET DEVELOPMENTS
dc.subjectEXCHANGE RATE APPRECIATION
dc.subjectEXCHANGE RATE DETERMINATION
dc.subjectEXCHANGE RATE POLICY
dc.subjectEXCHANGE RATES
dc.subjectFINANCIAL CRISIS
dc.subjectFINANCIAL DOLLARIZATION
dc.subjectFINANCIAL MARKETS
dc.subjectFINANCIAL SYSTEM
dc.subjectFOREIGN CURRENCY
dc.subjectGNP
dc.subjectINCOME
dc.subjectINCOME ELASTICITY
dc.subjectINCOME ELASTICITY OF DEMAND
dc.subjectINEFFICIENCY
dc.subjectINFLATION
dc.subjectINTEREST RATE
dc.subjectLABOR PRODUCTIVITY
dc.subjectMACROECONOMIC CONSEQUENCES
dc.subjectMARGINAL PRODUCT
dc.subjectNET INCOME
dc.subjectNOMINAL EXCHANGE RATE
dc.subjectNOMINAL STABILITY
dc.subjectNUMERAIRE
dc.subjectOUTPUT
dc.subjectOVERVALUATION
dc.subjectPESOS
dc.subjectPOLICY RESEARCH
dc.subjectPRICE ADJUSTMENT
dc.subjectPRICE LEVELS
dc.subjectPRODUCTION TECHNOLOGY
dc.subjectPRODUCTIVITY
dc.subjectPRODUCTIVITY GROWTH
dc.subjectPRODUCTIVITY INCREASES
dc.subjectPURCHASING POWER
dc.subjectPURCHASING POWER PARITY
dc.subjectREAL APPRECIATION
dc.subjectREAL EXCHANGE
dc.subjectREAL EXCHANGE RATE
dc.subjectREAL EXCHANGE RATES
dc.subjectREAL TERMS
dc.subjectRELATIVE PRICE
dc.subjectRELATIVE PRICES
dc.subjectSTABILIZATION
dc.subjectSTRUCTURAL REFORMS
dc.subjectTERMS OF TRADE
dc.subjectTRADABLE GOODS
dc.subjectTRADE BALANCE
dc.subjectUNDERVALUATION
dc.subjectVALUE OF MONEY
dc.subjectWAGES
dc.subjectWEALTH
dc.subjectWHOLESALE PRICE INDEX EXCHANGE RATE
dc.subjectINFLATION LEVELS
dc.subjectMACROECONOMICS
dc.subjectINCOME
dc.subjectPRODUCTIVITY
dc.subjectTRADING ARRANGEMENTS
dc.subjectINTERNAL EQUITY
dc.subjectLABOR
dc.subjectFOREIGN ASSETS
dc.subjectGROSS NATIONAL PRODUCT
dc.subjectBALANCE OF PAYMENTS
dc.titleTango with the Gringo: the Hard Peg and Real Misalignment in Argentinaen
dspace.entity.typePublication
okr.crossref.titleTango with the Gringo: The Hard Peg and Real Misalignment in Argentina
okr.date.doiregistration2025-04-10T09:50:23.155416Z
okr.doctypePublications & Research::Policy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/2004/06/4980119/tango-gringo-hard-peg-real-misalignment-argentina
okr.globalpracticeMacroeconomics and Fiscal Management
okr.globalpracticeTransport and ICT
okr.globalpracticeFinance and Markets
okr.guid411111468768684008
okr.identifier.doi10.1596/1813-9450-3322
okr.identifier.externaldocumentum000090341_20040728154918
okr.identifier.internaldocumentum4980119
okr.identifier.reportWPS3322
okr.language.supporteden
okr.pdfurlhttp://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2004/07/28/000090341_20040728154918/Rendered/PDF/wps3322.pdfen
okr.region.administrativeLatin America & Caribbean
okr.region.geographicalLatin America
okr.topicEconomic Theory and Research
okr.topicEnvironmental Economics and Policies
okr.topicMacroeconomics and Economic Growth::Macroeconomic Management
okr.topicPayment Systems and Infrastructure
okr.topicInformation and Communication Technologies::ICT Policy and Strategies
okr.topicMacroeconomics and Economic Growth::Economic Stabilization
okr.topicFiscal and Monetary Policy
okr.topicFinance and Financial Sector Development
okr.unitOff of Sr VP Dev Econ/Chief Econ (DECVP)
okr.volume1 of 1
relation.isAuthorOfPublication87169c2a-cc00-5945-b418-c06e0faeb3e2
relation.isAuthorOfPublication2c4139d2-7458-5296-9aea-6d3db3e1ae1e
relation.isAuthorOfPublication.latestForDiscovery87169c2a-cc00-5945-b418-c06e0faeb3e2
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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