Re: Incomes and Exchange rates; part 2

[Colin Danby <danbyc@xxxxxxx>]

Laura writes:

> The virtue of the gold standard or any other commodity backing is
> that it gives a clear signal to people. If the government devaluates
> or changes into a free float it destroys the confidence that might
> have generated. The gold standard is a symbol, it represents a
> promise given by the government. It gives people the possibility of
> protecting themselves, in case currency loses value, by converting
> the currency.

Thanks very much for this discussion.  The question arises of
the long-term sustainability of the fixed peg.

I have the impression Argentina is running current account
deficits in the neighborhood of $10 billion a year, roughly 3%
of GDP.  If foreigners are unwilling to finance this deficit
indefintely it will become necessary in time to raise exports
and/or lower imports.  What are the prospects for doing this?
Given that the evolution of relative prices in Argentina in
recent years has favored the nontraded sector, how likely is
this?

Will FDI close the gap?  Productivity?

No other Latin American country in recent years has been
experienced the level of real currency appreciation that
Argentina has and been able to maintain a peg.  (The fact
that the Argentine peg is named a currency board does not
I believe matter, but that's another discussion.)

What is current unemployment in Argentina?

Best, Colin