Monetary Policy in Argentina Under Convertibility, 1991-96

ARNAUDO, ALDO A.

doi:10.1590/0101-31572000-1066

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Brazilian Journal of Political Economy

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Articles • Brazil. J. Polit. Econ. 20 (1) • Jan-Mar 2000 • https://doi.org/10.1590/0101-31572000-1066 copy

Monetary Policy in Argentina Under Convertibility, 1991-96

Política monetária na Argentina sob conversibilidade, 1991-96

Authorship SCIMAGO INSTITUTIONS RANKINGS

ABSTRACT

A conceptual framework to analyze monetary policy might be the relationship “policy goal-operating target-monetary instrument.” Although the discretion of the monetary authorities is severely restricted, this analysis is also applicable to Argentina since 1991. Its monetary regime is governed by the Convertibility Law, which requires the Central Bank to convert the domestic currency into dollars, and by the Central Bank Charter, which prescribes that its “fundamental mission [...] is [...] to maintain the value of the currency.” Five periods were found when the operating targets and monetary instruments were different, while the policy goal of price stability remained unchanged.

KEYWORDS:
Monetary policy; convertibility; exchange rate regimes; currency crisis

Intervention	Length (days)	Interest Rates (%, annual)		Amount (average per day) (million $)
	Length (days)	Call	Swap	Amount (average per day) (million $)
	(1)	(2)	(3)	(4)
No	19.3	16.7	19.9	29.6
Yes	13.6	19.1	19.9	29.6

Type of Deposit	Date (end of month)
Type of Deposit	1991.5	1992.4	1992.10	1993.2	1993.8
I. Domestic currency:
Demand	80	77	71
Savings (common)	30	26	26	40	43
Savings (special)	5	3	3	40	43
Time (30-90 days)	5	3	3		3
II. Foreign currency:
Demand				40	43
Savings				40	43
Time (30-90 days)	5	5	5	0	3

Intervention	Length (days)	Interest Rates (0/0, annual)		Amount (average per day) (million $)
	Length (days)	Call	Swap	Amount (average per day) (million $)
	(1)	(2)	(3)	(4)
No
AprikJune	12.0	7.3
July-November	12.7	6.4
Yes
April-June	17.5	8.9	9.2	18.6
July-November	17.3	7.9	9.3	1 60.9

Type of Deposit	First Periodod		Second Period
Type of Deposit	December 20-January 4	January 4-January 31	January 31-February 22	February 22-April 10
$
Demand	-4.1	-1 .9	-0.2	04
Saving	0.0	5.1	-15.0	-6.7
Time	-13.4	-12.3	0.3	-13.4
us
Saving	1 .5	4.2	-2.3	-12.0
Time	-0.5	1 .0	-1 .6	-14.1

Type	December	January	February	March	April	May
International Reserves
Central Bank	1726	-512	-1227	-4107	-2803	-3405
	(12.1)	(-3.6)	(-8.6)	(-28 7)	(-19 6)	(-23 8)
Financial lnstitutions	661	430	-1474	-924	-1595	-976
	(10.9)	(7.1)	(-24.3)	(-15 2)	(-26 3)	(-16 1)
Legal Reserves
$	191	-1232	-1578	-1539	-1374	-1335
	(3.6)	(-22.9)	(-29.4)	(-28 7)	(-25.6)	(-24 9)
us	-216	-731	-776	706	-788	-858
	(-9 2)	(-31.1)	(-31.8)	(-30.1)	(-33.5)	(-36 5)
Central Bank Discounts	63	207	571	1528	1755	1813

Period	Goal	Operating Target	Instrument	Outcome
1st	Interest rate stability	Call interest operation	Swap	Success
2nd	Lowering interest rates	Market interest rates	Reserve requirement	Mixed
3rd	Fiscal policy substitution	Transitory budget deficits	Swap operation	?
4th	Stop financial crisis	Help system	Many	Success
5th	Financial sector solvency	Liquidity/solvency	Liquidity/solvency ratios	Mixed

Centro de Economia Política Rua Araripina, 106, CEP 05603-030 São Paulo - SP, Tel. (55 11) 3816-6053 - São Paulo - SP - Brazil
E-mail: cecilia.heise@bjpe.org.br

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Comments by J. Piekarz, J. Uriarte, E. Folcini and anonymous referees are duly appreciated. The usual disclaimer is in order. The same for the editing by G. Arnaudo.