The Future of Argentina's Quasi-Currency Board: Toward a MERCOSUR Monetary Union?

Abstract

This paper will examine the future of Argentina's Convertibility Plan, a stabilization program that was adopted in 1991 in response to years of hyperinflation and turmoil within the Argentine financial markets. This program linked the value of the Argentine peso to the U.S. dollar with a quasi-currency board. The Plan achieved rapid macroeconomic stabilization and helped to reinte­grate Argentina into global markets. However, permanent com­mitment to this program will not be in Argentina's best economic interest. After an evaluation of the advantages and disadvantages of the Convertibility Plan, I conclude that it is not the optimal arrangement for Argentina in the long run. I propose an alternate arrangement for Argentina and discuss some issues relating to a possible transition.