The Argentinean Currency Crisis: A Markov-Switching Model Estimation

Arbeitspapier

Despite the fact that Argentina has been suffering from a recession for years, the timing and severity of the recent currency crisis surprised most observers. This paper analyzes the role of fundamentals and self-fulfilling speculation in the Argentinean crisis. Arguing within a theoretical model of a fixed exchange rate system that allows for multiple equilibria, we show that the crisis, while being associated with weak and deteriorating fundamentals, cannot be explained by these macroeconomic factors alone. Estimating a univariate Markovswitching model, this paper shows that shifts in agents? beliefs did indeed also play a crucial role.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DIW Discussion Papers ; No. 348

Classification and Topics

• Classification: Wirtschaft ; Financial Aspects of Economic Integration ; Foreign Exchange ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
• Subject: Currency crises ; Self-fulfilling speculation ; Markov-switching models ; Währungskrise ; Devisenspekulation ; Fester Wechselkurs ; Schätzung ; Argentinien

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Alvarez-Plata, Patricia ; Schrooten, Mechthild
• Event: Veröffentlichung
• (who): Deutsches Institut für Wirtschaftsforschung (DIW)
• (where): Berlin
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/18084
• Last update: 10.03.2025, 11:45 AM CET