The first glimpses of Argentina's recovery can be seen. To many, what happened, and what is happening there seems a mystery. Abandoning "convertibility," i.e. a fixed exchange rate system, was supposed to be a disaster - and it was. Output fell and unemployment increased dramatically. Fear of these costs, combined with IMF bailouts, kept Argentina from abandoning its currency board long after it was clear that the system could not be sustained. This stubbornness made matters worse when things finally fell apart.
The first glimpses of Argentina's recovery can be seen. To many, what happened, and what is happening there seems a mystery. Abandoning "convertibility," i.e. a fixed exchange rate system, was supposed to be a disaster - and it was. Output fell and unemployment increased dramatically. Fear of these costs, combined with IMF bailouts, kept Argentina from abandoning its currency board long after it was clear that the system could not be sustained. This stubbornness made matters worse when things finally fell apart.