Re: dollarization

["Atilio Todeschini" <atitodeschini@xxxxxxxxxxx>]

I am no expert on Argentina, but just to clarify, are
> you claiming that Argentina's macroeconomic performance
> has been worse since it adopted a currency board than
> in the preceeding period?  That is not my impression.
> And when choosing institutions, it is important to recall
> that one is choosing among the *available* options.


Dear Alan:
When our currency board was adopted we were in a big slump, so it was
relatively easier to improve our GDP, but now that is not happening. I now
you choose the avaliable options, but in 1978 we instaled an active crawling
peg we have an awful end, so you have to think in the future when you peg
your exchange rate.
> Nevertheless, having a currency board at a time when
> the US dollar is appreciating against Argentina's other
> trading partners is indeed a burden.
> Despite this, export performance looks pretty good and
> even overall performance is only moderately bad, if the
> data at
>  http://www.mecon.gov.ar/progeco/dsbb.htm
> are a good indicator.

Don't you forget our exports are basically commodities, where the oils is an
important component of our exports. And when a country internal absortion is
in very bad shape, the enterprises try to sell their stuff anywhere they
can.

> > I think a dollarization will make things
> > get worse.
>
> Dollarization will probably make things better.
> It does not get rid of the appreciation problem
> mentioned above, but it does help with interest rates.
> This might well be worth the loss of seigniorage.
> (Of course, that is is better does not imply it is best,
> and I am not suggesting that it is.)

Our problem is not the exchange rate, because our debt is in dollars, the
problem is that we have an incredible red in our fiscal numbers and we are
not growing, so investors thinks we can go on default.
> > We are in a kind of liquity trap, because we can't lose our
> > interest rate to achieve a full employement situation when it's driven
> by
> > Greenspan.
>
> If Greenspan were setting Argentina's interest rates,
> and if the currency board were completely credible,
> Argentina would have the same interest rates as the US.
> Given Argentina's history, freeing monetary policy to
> respond to political pressures is not obviously attractive.
> Of course much may have changed; I don't know much about
> Argentina.
Greenspan sets the floor, not the interest rate. The problem is that we
can't set them lower to make people spend their money. Maybe is true that
because our history is not a good idea to release our monetary policy, but
dont forget two things.
1) We didn't have real economist for about 85 years. Since 1985 we have
people with real degrees in economics, so maybe our history is not really a
good index.
2)If we can erase one of the creators of money, a mean having our numbers in
equlibrium, we would be in a good position to have our monetary policy back

Atilio Todeschini

> Alan Isaac

_____________________________________________________________________________________
Get more from the Web.  FREE MSN Explorer download : http://explorer.msn.com