Five years of competitive and stable real exchange rate in Argentina, 2002-2007

We argue that the macroeconomic regime focused on the preservation of a stable and competitive real exchange rate (SCRER) has been a key factor explaining the rapid growth experienced in Argentina during 2002-2007. This policy promoted economic growth not only by preserving external and fiscal accou...

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Bibliographic Details
Published in:International review of applied economics 2008-03, Vol.22 (2), p.215-226
Main Authors: Frenkel, Roberto, Rapetti, Martín
Format: Article
Language:English
Subjects:
Argentina
Competition
Economic conditions
Economic growth
Economic policy
Exchange rates
Financial economics
Foreign exchange rates
growth
Monetary policy
real exchange rate
Studies
trilemma
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Summary:We argue that the macroeconomic regime focused on the preservation of a stable and competitive real exchange rate (SCRER) has been a key factor explaining the rapid growth experienced in Argentina during 2002-2007. This policy promoted economic growth not only by preserving external and fiscal accounts sustainability, but also by providing incentives to the tradable sector and thus encouraging the expansion of its production, employment and investment. Monetary and exchange rate policies aimed at preserving a SCRER collide with conventional wisdom, particularly with the open economy trilemma. We argue that the critiques based on the trilemma may fail to hold in situations of excess supply of foreign currency and analyze the conditions under which the SCRER policy is sustainable.
ISSN:0269-2171
1465-3486
DOI:10.1080/02692170701880734