In Argentina Currency Crisis, Article Review Example

According to the information reported in the article, the value of the peso recently diminished by 8%. Central-bank reserves currently have $29 billion in storage, which indicates that the GDP growth has dropped significantly over the past few years. This means that the current account balance has decreased as has the fiscal balance. Ultimately, this undermines the value on Foreign Exchange reserves and gold, because the peso is considered less valuable than other monetary sources. Therefore, when these nations exchange their money for gold, they will be able to get more than Argentina. This will cause both inflation and interest rates to rise.

If Argentina functioned under a system of exchange rates pegged around official parities, it would be able to use its international reserves of gold to adopt a higher value currency, which may help their economic situation improve. Adopting tariffs on imports and introducing capital controls will help build the country’s GDP because it will be making more income. Ultimately, this will help expand business which will contribute to the continuation of the trend. Letting its exchange rate drop within the allowable band around the central parity would allow Argentina to establish the opportunity to do more business with other nations, who will welcome exchanges with the country because they will be able to get products for lower prices due to the difference in currency.

In conclusion, there are many steps that Argentina might take to ensure that it could boost its economy again. However, it is difficult to tell whether it will take any of the steps that have been mentioned in this essay. It would therefore be advantageous for other countries to help bring it back to its feet.