Abstract:
Along history, multiple exchange rates led to economic distortions. The 2011-15 episode in Argentina does not differ from previous experiences. We document that a high Black Market Premium (BMP) increased deposits in foreign currecy by 75% during 2011-16. Similarly, private external assets grew 37.7% with respect to 2010. This paper assess the effects of exchange rate controls in Argentina using a partial equilibrium model. First, using Zellner’s Seemingly Unrelated Regression (SUR) structural approach, I calculate Argentina main import-price elasticities. Second, I estimate the natural rate of exchange rate of economy (NATREX) to assess the net welfare effects of exports and imports between the “official” and the “unified market”. Results indicate that the natural price of the official exchange should have been 31% higher compared to the official exchange rate (i.e. around 4.4 and 12 ARS units per U.S. dollar). The higher volume of capital imports suggest that trade openess should also have been higher. Overall, the total efficiency loss caused by exchange rate regulations was on average 4% of GDP during 2011-15 period.
Status: in the basement (dormant)
Welfare Effects of Exchange Rate Controls: Argentina 2011-2015
