International Borrowing and Macroeconomic Performance in Argentina
International Borrowing and Macroeconomic Performance in Argentina
This chapter investigates the evolution of capital flows and macroeconomic performance in Argentina from the adoption of the Convertibility Plan in 1991 until the collapse of the pegged exchange rate regime in early 2002. After exchange and capital controls were imposed in late 2001—through the so-called Corralito—the stock market experienced a 50 percent gain. One potential explanation of the stock market boom in Argentina is that investors viewed the likely devaluation of the peso as beneficial for firms, although in other countries such crises are generally harmful. Under the Corralito, the capital inflows did not occur, and the dollars and/or shares remained outside of Argentina. The Corralito led in a massive redistribution of wealth between depositors, lenders, and financial institutions.
Keywords: capital flows, macroeconomic performance, Argentina, Convertibility Plan, exchange rate, Corralito, stock market, capital inflows
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