ABSTRACT
Argentina’s experience in 1991–2000 shows that a country in a good macroeconomic situation with an apparently solid institutional framework may develop problems with competitiveness for unforeseen reasons. This also illustrates that with a fixed exchange rate, restoring competitiveness through deflationary policy is ineffective and can lead to dangerous social unrest. The experiences of Argentina, as well as South Korea (after the 1997 crisis) and Russia (1998) also illustrate that even in conditions of a deep economic and banking collapse, currency depreciation can effectively bring recovery. Although a forced exit from the Exchange Rate Mechanism (ERM) in 1992 was an unwanted experience for several European countries, the crisis actually showed that devaluation can be an effective tool for economic adjustment. Statistical analyses confirm that in spite of structural changes in the global economy, exchange rate adjustments continue to be effective in correcting the trade balance.
