Reference no: EM131053630
ECONOMY OF ARGENTINA
Assignment Question
On December 1st 2001, with the country facing increasing economic and social instability, the government of Argentina decided to close the country's banks, leading to almost total economic, social, and political collapse in the months that followed. Analyse the Argentinian crisis and its roots in the fixing of the exchange rate of the Argentinian Peso to the US dollar through the perspective of the ‘trilemma' proposed by Obstfeld and Taylor (2004). To what extent is the ‘trilemma' a useful analytic device?
Approaching the question
Students are reminded that whilst some questions may very evidently refer to a particular unit they are all designed to span issues across the entire module. A full answer to the question will require reflection on the issues that you have encountered throughout the module. It is important to bear in mind that the content of your answer will depend on the argument that you wish to put forward in answer to the question and not solely on the concepts that the question explicitly identifies.
The suggested article by Feldstein provides a good account and analysis of the Argentinian crisis and should be read as the first step in familiarising yourselve with events.
The second reading provides a good introduction to the notion of the ‘trilemma' developed by Obstfeld and Taylor regarding the relationship between exchange rates, monetary policy, and capital movements. While providing an interpretation of the events in Argentina through the perspective of the ‘trilemma' is an important component of the assignment, you should seek to go beyond a simple ‘application' of the trilemma by including criticisms of it and alternative perspectives to it and the Argentinian crisis in your assessment of it as an analytical device.
Further Readings (If applicable)
Martin Feldstein, 2002. Argentina's Fall: Lessons from the Latest Financial Crisis. Foreign Affairs, 81(2), pp.8-14. Available at:
https://www.jstor.org/stable/20033080.
Trilemma in History: Tradeoffs among Exchange Rates, Monetary Policies, and Capital Mobility. The Review of Economics and Statistics, 87(3), pp.423.
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