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Macroeconomic events before and after Argentina's 2001-2002 currency crisis

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  1. Introduction.
  2. Discussion.
  3. The two potential risks that were underestimated during the convertibility plan.
  4. Introduction of a revised organic law.
  5. The fall of the economy.
  6. Conclusion.
  7. References.

In practice economical balance is unachievable. Stabilization conditions that many scholars and economists claim are but fleeting status of the economy. Some of the major crises around the world including the US stock market collapse, Asian financial crisis, Latin financial crisis and recently the Argentinean banking crisis are examples the statement. Theories in economics indicate that the result of such financial collapse stem from several factors. Any one factor can affect the other such as the determination of nominal exchange rate (NER) or the real exchange rate (RER); production possibility frontier and its impact on external balance of payments; overvaluation of goods in the factor markets; and current account destabilization etc (Li 2005). Any kind of instability in these factors as a result of government policies can have a catalytic effect on the economy.

[...] These views only indicate that as the Convertibility Plan begun to pick speed on the road of recovery policies and political strife intervened to bring it down resulting in a setback for the economy. The transition from an orthodox economy had not been that difficult despite the fixed currency exchange rate, debt crisis and strict government policies based on fiscal policies. Instead Argentine had almost achieved its desired status despite several after math of international shocks had it not been for the government's ultimate decision to eliminate the Convertibility Plan. [...]

[...] In doing so, it has demonstrated that it is feasible for a country to relinquish control over its monetary policy." (Velde and Veracierto 2000)[5]. References Artana, Daniel. La Economia Durante el Plan de Convertibilidad", mimeo, Fundacion de Investigaciones Economicas Latinoamericanas, March 2001. Burdisso et al. The Argentine Banking and Exchange Rate Crisis of 2001: Can We Learn Something New from Financial Crises? Classification Number JEL: C33, E51, July 2002. Hanke, Steve H. Statement of Professor Steve Hanke on Argentina's Current Political-Economic Crisis. Professor of Applied Economics, The Johns Hopkins University, March Hanke, S. H. and Schuler, K. A Dollarization Blueprint for Argentina. [...]

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