Abstract:
Along history, Argentina’s multiple exchange rate system has created serious economic distortions. The 2011-15 episode does not differ from previous experiences. For instance, private external assets grew 37.7% with respect to 2010 as well as dollarized deposits (75% on average) during 2011-16 while the Black Market Premium reached a peak of 60.7% in 2013. This paper takes a deep step and 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 between the “official” and the “unified market”. Results indicate that the price of the official exchange should have been around 4.4 and 12 ARS units per U.S. dollar. Likewise, a higher volume of capital imports suggests 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
Welfare Effects of Exchange Rate Controls: Argentina 2011-2015
