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Determinants of Argentinas External Trade Luis Cato

Determinants of Argentinas External Trade

Luis Cato

Published September 1st 1999
ISBN : 9786613796578
ebook
36 pages
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 About the Book 

Following the financial and trade liberalization reforms of the late 1980s/early 1990s, a number of emerging market economies have experienced sizable current account deficits. In countries such as Argentina and Mexico, where rapid disinflation wasMoreFollowing the financial and trade liberalization reforms of the late 1980s/early 1990s, a number of emerging market economies have experienced sizable current account deficits. In countries such as Argentina and Mexico, where rapid disinflation was accomplished through the combination of an exchange rate peg and trade liberalization, soaring current account deficits appeared to conform to the typical stabilization cycle (Kiguel and Leviatan, 1992- Vgh, 1992): the marked real exchange rate appreciation and recovery of private consumption that followed macroeconomic stabilization spurred imports while inhibiting export growth, leading to sizeable trade deficits. At an initial stage of the reforms, expectations were created that such trade imbalances would be temporary: with inflation eradicated, consumption growth leveling-off, and domestic productivity enhanced through privatization and deregulation, trade deficits would tend to be gradually reversed, respecting the intertemporal budget constraint of a balanced current account in the long-run.