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February 24, 2009

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Technically you have three questions there. In reply to your second second question: sometimes I wonder (especially as an exercise to avoid writing my dissertation) what the elements of the perfect storm were in Argentina and what we can do to prevent future severe recessions. I think that the underlying problem in my dear country is the lack of longer-term growth/development strategy. The adopted policies generally address a current situation without taking into account the future (i.e. when the next government is in power).

The last two crises had an clear weak point in common: the currency board arrangement. The CBA that saved Argentina from hyperinflation became a de facto long(ish) term policy without a clear exit strategy. I am not sure I have the right answer but I think that if an economy is too reliant on capital inflows, a CBA is very restrictive. What to do when capital flows fly to quality and there is no monetary policy or lender of last resort to speak of?

Just my $0.02, we can keep on discussing this forever, right?

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