Argentina Currency Peg and Fiscal Reforms Harvard Case Solution & Analysis

Argentina Currency Peg and Fiscal Reforms Case Study Solution

Implications of the convertibility Plan for Argentina Exchange Rates

The convertibility plan has high implications for the Argentina exchange rate against other currencies. The plan could lead to an appreciation or the depreciation of the local currency against other currencies. An increase in the demand for conversion into the local currency could lead to an appreciation of the local currency and an increase in the demand for conversion of local currency into other currencies could lead to a depreciation in the local currency.

Interdependence between Fiscal and Monetary Policies

Indeed, there is an interdependence between the fiscal and monetary policies. For example, under a passive monetary policy, interest rates are used as a factor to accommodate fiscal policies. The demand and supply of money controlled by the monetary policy affect the resources for spending under the fiscal policies. Fiscal policies can affect the personal spending, investments, currency rates, etc. Which are directly or indirectly associated with the monetary policy.

Conclusion

Although, Argentina went through an extreme economic downfall during last half of the 19^th century, but with the efficient economic policies it revived its economy in a very short time period. Convertibility plan played a vital role in economic revival of Argentina despite of its various loopholes and the potential risks attached with it………..

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