Cerro Meloni

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CCRRIISSEESSIINNAARRGGEENNTTIINNAA::1188223322000022..TTHHEESSAAMMEEOOLLDDSSTTOORRYY??

Ana Mara Cerro and Osvaldo Meloni*

Universidad Nacional de Tucumn

Abstract


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Crises in Argentina: 1823 2002. The same old story?

Ana Mara Cerro and Osvaldo Meloni*

Universidad Nacional de TucumnCasilla de Correo 209

4000 TucumnArgentina

E-mail: [email protected]@herrera.unt.edu.ar

La crisis actual es la misma de 1870, la de 1865, la de 1860, de la 1852,

de la 1840, etc. El pas ha vivido en esas crisis desde que dej de sercolonia de Espaa. Podra decirse que no es econmica sino poltica ysocial. Reside en la falta de cohesin y de unidad orgnica del cuerpo oagregado social que se denomina Nacin Argentina, y no es sino un plan,un desideratum de nacin. La diversidad y lucha de sus instituciones decrdito, la anarqua de sus monedas, la emulacin enfermiza que presidea sus gastos dispendiosos en obras concebidas para ganar sufragios ypoder, vienen del estado de descomposicin y desarreglo en que se

mantienen las instituciones, los poderes, los intereses del pas.Juan Bautista Alberdi

Escritos Pstumos. Estudios Econmicos. Tomo I.

En los ltimos 15 aos, la Argentina ha gastado mucho ms de lo queproduca, omitiendo reponer las inversiones bsicas de capital yendeudndose fuertemente en el exterior. ... Ms del 80% de los ingresosdel Estado se va en sueldos, y ello explica que no haya dinero para hacer

viviendas ni caminos ni escuelas ni siquiera para reparar pavimentos o


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resembled each other. Moreover, Alberdi sustained that all of them were driven byirresponsible fiscal policy, which in turn were caused by weak or lacking institutions.

Many years later, Frondizi, sat on the Rivadavias chair1, recited the long litany ofmismanagement and excesses in the argentine economy. Somehow, he validated the words

that Borges would write a couple of years later (see introductory quote). Fondizi might havebeen aware of Alberds writings, but he did not kwon that he would not be the last in the largelist of conspicuous men pledging for sound institutions and discipline in fiscal and monetarypolicy.

The severity and persistence of the crises, particularly during the second half of the XXcentury, created a sense of dj vuin the economic performance of Argentina.

Case studies focused on particular crisis, like della Paolera and Taylor (1999, 2000) thatanalyze the 1929-32 crisis, seem to confirm the importance of the fiscal link in the crisis,although they stress too other factors like poor banking sector design and external conditions.Similar conclusions can be drawn from numerous papers that study more recent crises.However, as far as we know, there are no comprehensive studies on argentine crises for longperiods of time, covering the centuries its beginnings as well as the present.

Secondly, we look for regularities in the economic history of crises in Argentina, analyzing thebehavior of key macroeconomic variables in the neighborhood of the crises. In order to

compare crises and non-crises periods, we follow different procedures. The simplest is ahistogram analysis, but we also use statistical techniques for a more systematic comparison,reporting non-parametric tests, such as Kolmogorov-Smirnov for testing equality of distributionfunctions and Kruskal-Wallis to test for equality of populations.

The analysis of the macroeconomic variables in the surroundings of the crises also helps us totest the validity of Alberdis hypothesis as well as to determine whether they respond to thepredictions of the first or second-generation models of balance-of-payments (BOP) crises. Thisis particularly important since policy prescriptions are different depending on the type of crisisf d b th t


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The new generation models are based on the existence of multiple equilibrium. Wheninvestors, while not questioning that currency policy may be consistent with the currency peg,they anticipate that a successful attack will alter policy, so it is expected future fundamentals,conditional on an attacks taking place, which are incompatible with the peg. In this casegovernment might defend the currency, but the costs (high interest rate, high unemployment

rate) can be so high that government finally devaluates, so market anticipate that action andacts in advance.

The government has so many good reasons to abandon the fixed exchange rate as to defendit. But the cost of defending a fixed exchange rate increases when people expect that theregime will be abandoned.

There might be several reasons why government wishes to abandon fixed exchange rate. Forexample, if government has a large debt burden denominated in domestic currency,devaluation would evaporate part of the debt. Or, if the country is suffering high unemploymentrates, and nominal wages are rigid, devaluation would diminish real wages.

If government has reasons to devaluate, why it would defend fixed exchange rate? One reasonin inflation-prone countries is that a nominal anchor is a guarantee against high inflation rates.It is also argued that a fixed exchange rate facilitates investment and international trade.Finally it might be considered as a strong commitment to international cooperation (the caseof Sweden in 1992)

Models of self-fulfilling attacks imply that good fundamentals may not suffice to avert currencycrisis. The state of fundamentals determines the existence and multiplicity of attackequilibrium. In Krugmans model fundamentals may be consistent with exchange rate or not. Insecond generation models the same is true for extreme values of fundamentals, but theresalso a large middle ground over which fundamentals are neither so strong as to make crisesinevitable nor so weak as to make an attack impossible.

An important difference between this two models is that in the first you can anticipate the

t f th d l ti f hil i th d th ti i i d t i d it


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Where the symbol represents the growth rate of the variable, e is the exchange rate, Rstands for international reserves, iis the domestic interest rate and e, R, iare the standarddeviations of the growth rate of the exchange rate, international reserves and domestic interestrate, respectively.

It can be observed that the three components of the Index are weighted by the inverse of therespective standard deviation to avoid the most variable component dominates the indexmovements. However, we also used different weights to test the robustness of the index, andthe crisis determination proved to be quite robust to different weight specifications.

The index was computed with annual data from 1823 to 1913 and with monthly data from 1914to 2002. We imposed different criteria to sort crises depending on the periodicity of data. Inboth cases, whenever the MTIis greater than one half STD, we name it a signal or turbulentepisode.

With annual data, we arbitrarily classified an episode as deep crisis when the marketturbulence index exceeds one and a half standard deviations (STD) from the mean value in agiven year. If MTIis greater than two STD we say that the crisis is very deep and if MTIonlyexceeds its mean value in one STD, we term that episode as mild crisis.

With monthly data availability, we require at least three close months with MTIgreater thanone STD to consider that episode as crisis. If the MTI is greater than one STD but less than

two STD, we call it mild crisis. The term deep crises is given to an episode with at least twoclose months with MTIgreater than two STD. If MTIexceeds its mean value in three STD atleast twice the episode is considered very deep. The remaining episodes, i.e. when the indexdeparts less than one half standard deviation from the average are termed as non- crisis ortranquility times.

In order to determine the boundaries of a given crisis and so avoiding dating twice the samecrisis, we require at least six months with no signals between each other.

C it i t t C i


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(b) 1862- 1913

(c) 1914- 1945

(d) 1946- 1976

(e) 1976- 1991

(f) 1992 2002

It is worth remark that the terms tranquility, mild, deep and very deep are referred toeach sub period considered and is not an absolute qualification for the whole period.

DDAA TTAA

Considerably effort has been devoted on the construction of time series for 180 years. Themarket turbulence index was computed from annual data since 1823 through 1913 and frommonthly data from 1914 onwards. Exchange rates were taken from Vzquez- Presedo (1971and 1975), mbito Financiero (1984) and FIEL. To construct the international reserves serieswe use data from Vzquez- Presedo (1971 and 1975) International Monetary Fund and BancoCentral de la Repblica Argentina (BCRA). Interest rates were taken from Vzquez-Presedo(1971 and 1975), FIEL and BCRA. Monetary, fiscal and international trade variables wereobtained from Corts Conde (1989) and also from BCRA, Ministerio de Economa de laNacin, Vzquez-Presedo and from Gerchunoff and Llach (2003). Recent data of terms oftrade as well as exports and imports are CEPALs.

TTHHEECCLL AA SSSSIIFFIICCAA TTIIOONNOOFFCCRRIISSEESS

We dated 28 crises throughout 180 years of history5. That is, on average, Argentina had acrisis every 6.4 years. Sixcrises were rated as very deep, elevenas deep and elevenasmild. Interestingly, the number and magnitude of the crises increases through time (seeTable 2). The six very deep crises identified correspond to the years 1826-27, 1889-91,1929-32, 1975-76, 1989-91 and 2001-02.

C i S


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The 28 crises implied 49 crises years. That is, Argentina was 27% of its 180 years in crises,which meant one crisis yearevery 3.7 years. A given year is considered a crisis year if themarket turbulence index exceeds one standard deviation from the average in at least 2 monthsconsecutive or alternate.

According to our index, the most turbulent period of Argentinas history was 1977 1991, notonly because it registered 5 crises in 15 years, that is an episode every 3 years, but alsobecause nine of those years were crisis years (see Appendix, Table 1 A for details).

IIVV.. MMAA CCRROOVVAA RRIIAA BBLL EESSBBEEHHAA VVIIOORRIINNTTHHEENNEEIIGGHHBBOORRHHOOOODDOOFFTTHHEECCRRIISSIISS

How did the Argentine economy perform in the neighborhood of crises? Is there any regularityin the behavior of the macroeconomic variables around these extreme episodes? Did theArgentine crises respond to the predictions of the first or second-generation BOP crisismodels? In order to approach to the answer of these questions we present a description of themacro variables behavior in the neighborhood of the very deep crises. In this paper werestrict our analysis to very deep crises. Tables 4, 6, 8, 10, 12 and 14 summarize thebehavior of the main fiscal, monetary and external sector indicators before, during and aftereach very deep crisis, while tables 3, 5, 7, 9, 11, and 13 show how the activity evolved duringcrisis years and the behavior of the components of the Market Turbulence Index: exchangerate, international reserves and interest rate.

Before crises.

With the sole exception of the 1929-32 crisis, the remaining very deep crises hadsignificant and persistent budget deficits in the years preceding each crisis episode.Remarkably, the years before de 1975-76 crisis show fiscal deficits around 8% of theGDP. Likewise, in the two years preceding the 1989-91 crisis and the 1890 91 crisisbudget deficit averaged 5.5% and 3.8% of the GDP respectively. A closer look at thefiscal history of Argentina shows that deficits were the norm and surpluses very rare:only the years 1893, 1920 and 1993 (see Figure 1).


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From 1825 to 1828, took place the war with Brazil for the territories of the Banda Oriental(today, Uruguay). The country was highly dependent on trade taxes that amounted about 80%of total revenues and the Brazilians knew it so they imposed a naval blockade on the port ofBuenos Aires with the consequent impact on fiscal accounts. The Treasury financed its deficitby printing money, with the consequent inflation and exchange rate depreciation. The situation

worsened in 1827 as the result of the default declared on the 5 million gold pesos loancontracted with London in 1824. Servicing on the debt was not restored until 1849.

It is interesting to observe (see table 4) that fiscal expenditures was increasing at a significantrate even after the war with Brazil. In fact, in 1824 the rate of growth of public expenditureswas 67.7%

With the end of hostilities with Brazil the economy seemed to recover but internal conflicts thatended up with the execution of the Governor of Buenos Aires, Manuel Dorrego brought about

a new period of turmoil and growing budget deficits.According to Burgin (1975) in 1829, 77%of fiscal revenues were dedicated to millitary expenditure6.

During the Rosas rule7, despite a realtively austere administration, the country suffered twomore crises episodes related to blockades on the port of Buenos Aires city. First, by theFrench in 1838 1840 and combined Fench and British forces in 1845 1848.

Table 4. Macroeconomic performance in the neighb orho od o f the 18261827 crisis

Growth ratesYears Fiscal

RevenuesPublic

ExpendituresMoneyIssue

ImportsFiscal Deficit as% of revenues

1824 30.6 67.7 -24.6 1.9

1825 1.2 8.3 15.1 71.5 9.1

1826 -56.2 177.3 240.5 -23.9 592.2

1827 160.8 14.7 26.6 -53.1 204.3


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banks broke and, given the impossibility of facing their obligations, a generalized default wasdeclared.

In April 1890 a new political party, Unin Cvica, generated a bloody insurrection that ended upin Juarez Celman resignation11. According to Corts Conde (1989), the revolution of the 90s

was a political but also a moral reaction to a wasteful administration, accused by revolutionaryas a corrupt one.

In 1891 the minister of finance, Victorino de la Plaza, carried out a tight fiscal and monetarypolicy that allowed restructuring public debt and the return of the currency board system fromNovember 1899 to August 1914. These measures, in addition to banking sector reforms, werethe cornerstone of renewed stability and growth for more than 20 years.

Table 6. Macroeconomic performance in the neighb orho od o f the 18891891 crisisGrowth rates

YearsGDP

FiscalRevenues

PublicExpenditures

Money(M3/P)

Exports Imports

FiscalDeficit

% ofGDP

Terms oftrade

1995=100

CurrentAccountas ratioof GDP

1887 11.9 27.18 24.48 10.0 20.9 22.9 1.65 95.5 -18.5

1888 9.9 -8.68 7.03 34 18.6 9.4 2.29 92.9 -20.4

1889 17.2 9.38 8.09 33 -9.9 28.1 1.69 78.4 -30.4

1890 -4.3 -23.65 -31.6 12 11.9 -13.6 0.63 73.4 -24.5

1891 -11.1 -34.12 -11.75 -23 2.4 -52.7 0.79 67.2 1.1

1892 8.8 69.79 14.92 -7 9.9 36.1 0.35 80.5 -0.3

1893 4.9 17.77 -1.65 7 -17.0 5.1 -0.02 73.5 -7.5

Source: Llach and Gerchunoff (2003), Corts Conde (1989), della Paolera (1988) and Taylor (1997)

It is worth noting that in the introductory quote, Juan Bautista Alberdi explicitly mentions five


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only major Latin America debtor to honor the service on its external debt but at the cost ofusing about 60% of the gold reserves at the Conversion Office.

Table 7. Crises in the interwar period:1914 1945

Growth rate (%)Crises

InternationalReserves

Exchange RateDepreciation*

Interest Rate GDP

Duration(months)

Beginning - EndType

1914 -15.4Apr - Jul 19140.7

Mar - May 191416.7

Apr - Aug 1914-10.4

1914-1913

3MayJul 1914 Deep

1918/19 1.1Aug 1918 - Feb 19190.1

Jul 1918 - Apr 191927.6

Jul 1918 - Apr 19193.7

1919-191810

Aug 1918 Apr1919 Mild

1920/21 0.0Jul 1920 - May 192148.3

Apr 1920 - Jul 192110.2

Oct 1920 - Apr 19212.6

1921-192011

Jul 1920 - May 1921 Mild

1929/30/31/32

-48.9Jan 1929 - Feb 1932

79.5Jan 1929 - Oct 1931

28.4Dec 1928 - May 1931

-13.71932-1929

24Mar 1929 - Feb 1932

VeryDeep

1937/38 -28.0Jun 1937 Apr. 193818.6

Jun 1937 Apr 193811.9

Oct 1937 Jan 19390.31

1938-193714

Mar 1937 Apr 1938 Mild

Note : See Table 1A for details. The rate of growth of International reserves as well as exchange ratedepreciation are computed from a peak to a trough in the neighborhood of the crisis

* Rate of growth of the depreciation of the local currency with respect to the U.S. dollar

The 1929-32 crisis was a turning point not only for the economic history because regulationand interventionism started but also because the first coup detatocurred in Sepember 6, 1930opening a dark period of interruptions of the constitutional order.

Table 8. Macroeconomic performance in the neighb orho od o f the 19291932 crisis


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Early in 1946, Pern, former vice president of de facto president Farrell took office. Hisadministration was characterized by high intervention in the price system. Saving andinvestment were determined by private decisions but the allocation was subject to rigid andstrict banking credit control1415. Pern redistributed income towards the laborers by increasingminimum wages and controlling output prices and obtained a rapid industrialization by altering

the relative price agricultural vs. industrial goods in favor of the former.16

From 1946 to 1949 Pern carried out expansive fiscal and monetary policies financed byCentral bank reserves and increasing inflation tax. Fiscal expenditures were of such magnitudethat evaporated reserves as well as pension system funds17. Anti- inflationary measures takenduring 1949 and 1950 failed and crisis reappeared in 1951. The fight against inflation hasstarted and the forces of fiscal deficit have won one of many battles to come.

Table 9. Crises in th e years of Pern and t he m ilitaries 1946 - 1976

Growth Rate (%)

CrisesInternational

ReservesExchange Rate

DepreciationGDP

Duration(months)

Beginning - EndType

1948/49 -48.1Feb48-Jan50210.2

Jan48 Nov49-1.29

1949-194820

Mar48 Nov 49 Deep

1951 -30.6Dec 1950 Dec. 1951 114.7Jun 1950 Sep 1951 -5.031952-1951 8Jan Aug 1951 Mild

1955 -40.7Dec 55 Jan 5666.7

Sept. 1955 Jan. 19562.77

1956-19559

May 55 - Jan 56 Mild

1958 -78.0May 1957 Oct. 195897.6

Dec 1957 Oct 1958-6.45

1959-195810

Jan Oct 1958 Deep

1962 -75.7Aug 1961 Oct. 196276.2

Dec 1961 Nov 1962-1.41

1963-196210

Jan Oct 1962 Deep

1964/65 -63.5 103.5 1.64 13 Mild


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already in May in $47,0 Ley. The depreciation of the peso was of 89,2% with regard to samemonth of the previous year, while the wholesale prices had grown 915% in same period. Theofficial dollar was already in $140,3 Ley, while the parallel dollar quoted at $245,0 Ley.

Again, we can associate crisis to increasing public expenditures and huge fiscal deficit

Table 10. Macroeconomic performance in th e neighborh ood of th e 19751976 crisis

Growth rates

YearsGDP

FiscalRevenues

PublicExpenditures

Money

(M3/P)Exports Imports

FiscalDeficit

As % ofGDP

Termsof trade(1995=

100)


1973 3.7 13.25 16.88 20 68.26 17.03 7.6 105.2 0.81974 5.4 31.08 26.85 26 20.35 63.04 8.1 115.4 0.1

1975 -6.0 -29.05 -0.90 -20 -24.66 8.57 16.1 99.9 -2.6

1976 0.0 16.13 -18.68 -15 32.24 -23.15 13.6 99.5 0.9

1977 6.4 17.73 3.83 20 44.32 37.21 8.3 95.1 1.7

1978 -3.2 -4.40 13.85 4 13.23 -7.88 10.3 86.7 2.1

Source: IERAL (1986) , Taylor (1997)

TTHHEETTUURRBBUULL EENNTT7700SSAA NNDD8800SS((1199776611999911))

The twenty-one years that span from the last military irruption in March 1976 to the successfulstability plan known as Convertibility were particularly tumultuous. We date four crises thatcover 80% period. Only the years 1977, 1978 and 1979 were tranquility years relative to thesub period.


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between the monetary and fiscal policy caused a run against the peso and forced thegovernment to devaluate in February 1981. In March reserves had decreased to one half of itsOctober level. At the same time, the liquidation of the Banco de Intercambio Regional (BIR),one of the largest of the country, was the beginning of a banking crises. At the end of 1980 theCentral Bank had to assume control of 60 banking institutions. That banking crises was the

consequence of a deleterious combination: government acting as lender of last resort, freedomin fixing interest rate and a poor regulated banking system.

Table 12. Macroeconomic performance in th e neighborh ood of th e 19891991 crisis

Growth rates

YearsGDP Fiscal

RevenuesPublic

ExpendituresMoney

(M3)Exports Imports

FiscalDeficit

as % ofGDP

Terms oftrade

1995=100


1987 2.58 0.06 10.6 -1.0 -7.24 22.78 4.99 79.1 -3.9

1988 -1.88 -5.32 -11.46 20.3 43.72 -8.44 6.05 89.3 -1.2

1989 -6.22 0.32 -10.28 -5.9 4.87 -20.99 3.79 89.7 -1.7

1990 -1.3 -18.4 -4.8 -65.4 28.95 -3.61 2.79 84.1 1.3

1991 10.5 16.6 11.33 -16.5 -2.65 101.67 0.90 88.7 -1.5

1992 10.3 14.2 12.51 27.8 2.31 79.26 0.06 95.4 -3.7

1993 6.03 7.85 7.10 22.4 6.26 15.64 -0.32 96.3 -3.5

Source: Ministerio de Economa de la Nacin

The defeat in the Malvinas war provoked the end of the military government and in 1983 theJunta transferred the power to the elected president Ral Alfonsn.

After failing attempts in his beginnings, Alfonsn appointed Sourrouille to stop inflation. Theanti-inflationary plan known asAustralconsisted of a few fiscal measures on the revenues sideand a currency substitution (the Argentineans peso was replaced by a new currency


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FFRROOMMBBOOOOMMTTOOBBUUSSTT((1199991122000022))

Finally, in the sub period 1991 2002 we find only 2 crises in 11 years. The first one, in 1995known as the tequila crisis for its roots in the Mexican devaluation of 1994, was short but deep.The second, during 2001 and 2002 was one of the deepest in Argentinas history.

Table 13. Crises in th e last decade:1991 2002

Growth Rate (%)

CrisisInternational

ReservesExchange Rate

DepreciationInterest Rate GDP

Duration(months)

Beginning - EndType

1995-40.2

Nov 1994- Apr 19950.0

Jun Dec 1994150.0

Oct 1994 Apr 1995 -2.95

Dec 1994 Mar 1995 Deep

2001/02 -67.2Sep 2000 Oct 2002268.8

May 2001 Nov 2002737.9

Aug 2000- Jul 202 -14.825

Oct 2000 Oct 2002VeryDeep

Note : See Table 1A for details.

In April 1991, Menem launched the so-called Convertibility Plan, a currency board system thattied the peso to the U.S. dollar at 1 to 1 rate. The fixed exchange rate served as an anchor to

prices ending with decades of high inflation rates. In the first three years, convertibility wassupported by important reforms, such as deregulation and privatization of state-ownedcompanies, which brought about an economic boom. Argentina attracted extensive foreigninvestment, allowing banks, public utilities and other key sectors to modernize by incorporatingnew technology. Two major problems were present in Menem administration: highunemployment rates and high corruption indexes.

By the end of 1994 Mexicos devaluation stroke strongly Argentinas economic activity.However Convertibility survived and Argentina economic growth returned in 1996. By means of


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Table 14. Macroeconomic performanc e in the neighborh ood o f the 2001- 02 crisis

Growth rates

YearsGDP

Fiscal

Revenues

Public

Expenditures

Money

(M3/P)Exports Imports

FiscalDeficit

As % ofGDP

Termsof trade(1995=

100)

CurrentAccountas ratio

of GDP

1997 8.1 12.68 6.11 21.5 13.46 26.27 1.46 106.5 -4.2

1998 3.9 2.99 4.82 22.1 -1.65 3.90 1.36 100.7 -4.9

1999 -3.4 -2.69 5.23 7.0 -11.42 -19.16 1.68 94.7 -4.2

2000 -0.8 3.21 0.46 -1.2 11.22 0.30 2.39 104.2 -3.1

2001 -4.4 -6.02 -0.17 -6.0 2.96 -19.92 3.24 103.7 -1.7

2002 -11.0 -15.9 -23.56 -52.1 -4.62 -55.41 1.3 101.9 9.2

Source: Ministerio de Economa de la Nacin

VV.. EEMMPPIIRRIICCAA LL RREESSUULL TTSS

We compare the behavior of macroeconomic and financial variables during crises using ascontrol group the same variables but during non crises periods. We cover a period that spanfrom 1885 up to 2002 for Argentina. In that period we dated 42 years of crises very deep, deep

and mild, while 85 years of non-crises.

Table 15 presents the mean and standard deviation of the series. There can be seen importantdifferences between crises and non-crises samples.

Table 15. Panel A. Mean and Standard Deviation of Crises and non-Crises Episodes.

Growth RateParameter Index of Market

Turbulence


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Table 15. Panel B. Mean and Standard Deviation of Crises and no n Crises Episod es.

Growth Rate (%) Parameter

GDP PublicExpenditure*

PublicRevenue*

Inflation M3

Mean -0.5 -1.5 -2.9 237.7 -3.7CrisesStandard Deviation 6,3 15.4 14.2 617.4 29.2

Mean 5.0 8.1 8.5 15.0 12.4Non-crisesStandard Deviation 7,6 20.6 15.8 36.4 27.9

Mean 3,6 6.1 5.1 81.7 7.6Total

Standard Deviation 7,8 21.6 16,1 352.3 29.1

Panel C presents the behavior of variables related to the external sector. As expected, importsshrank during crises and explode in tranquility years. On the other hand, exports fell duringcrises despite most of them showed as distinctive feature large devaluations, which showsunequivocally that exports does not react to nominal but real exchange rate and that crises arenot the proper environment to promote the export sector.

Table 15. Panel C. Mean and Standard Deviation of Crises and non-Crises Episodes.

Growth Parameter Exports Imports CurrentAccount/GDP Terms of Trade

Mean -0.37 -3.68 -3.6 97.4Crises

Standard Deviation 20,31 29,87 6.9 17.8

Mean 10,84 13,14 -2.3 102.0Non-crisesStandard Deviation 19,67 27,82 5.4 17.6

Mean 7.0 7.58 -2.7 100,5


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Figure 2. Current Account and Crises

-0.35

-0.3

-0.25

-0.2

-0.15

-0.1

-0.05

0

0.05

0.1

0.15

1884

1888

1892

1896

1900

1904

1908

1912

1916

1920

1924

1928

1932

1936

1940

1944

1948

1952

1956

1960

1964

1968

1972

1976

1980

1984

1988

1992

1996

2000

0

0.2

0.4

0.6

0.8

1

1.2

1.4

Crisis CA/PBI

Figure 3. Terms o f Trade and Cris es

160

180


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tabulated are values of these tests under the null, so small values lead us not to reject the nullof equality of population. Small probabilities value computed let us reject the null (one asteriskindicate values less than 5%, while double asterisk less than 1%). Consistently with whatsustained before, we reject the null for all series, excepting CA and TOT, for all the methodsreported.

Table 16. Panel A. Test of equality of po pulation.

Method Index of MarketTurbulence

Reserves Exchange Rate

Wilcoxon/Mann-Whitney 5.9** 3.5** 6.1**Med. Chi-square 17.5** 5.2** 24.4**Kruskal-Wallis 35.0** 12.0** 36.8**

van der Waerden 36.1** 11.5** 38.3**

Note: ** p-value less than 1%

Table 16. Panel B. Test of equality of po pulation.

Method GDP PublicExpenditure

PublicRevenue*

Inflation M3

Wilcoxon/Mann-Whitney 3.8** 2.6** 3.6** 4.4** 2.6**Med. Chi-square 9.6** 2.8** 11.7** 11.7** 2.3**

Kruskal-Wallis 14.5** 6.9** 13.1** 19.5** 6.8**van der Waerden 14.3** 7.0** 13.7** 21.6** 8.4**

Note: ** p-value less than 1%

Table 16. Panel C. Test of equality of po pulation.


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Table 17. Panel A. Kolmogorov- Smirnov Test.

Index of MarketTurbulence

Reserves* Exchange Rate*

Kolmogorov- Smirnov 0,62 0,49 0,60

P-value 0,00 0,00 0,00Corrected 0,00 0,00 0,00

Table 17. Panel B. Kolmogorov- Smirnov Test.

GDP* PublicExpenditure *

PublicRevenue*

Inflation M3*

Komogorov Smirnov 0,45 0,32 0,44 0,51 0,51

P-value 0,00 0,02 0,00 0,00 0,00

Corrected 0,00 0,00 0,00 0,00 0,00

Table 17. Panel C. Kolmogorov - Smirnov Test.

Exports* Imports* CA/GDP TOT

Komogorov Smirnov 0,36 0,42 0,14 0,12

P-value 0,01 0,00 0,71 0,88

Corrected 0,00 0,00 0,63 0,83

VVII.. CCOONNCCLL UUSSIIOONNAlguna vez nos deja pensativos la sensacin de haber

vivido ya ese momento.


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splitting periods (other than crises and non- crises), since the change in their distributionsleads or lags crises episodes.

With all this evidence at hand, we might say that crises in Argentina are mostly first generationcrises: fiscal imbalances were always present, which is consistent with the predictions of firstgeneration speculative attack models like that of Krugman. However we have to point out thatin most crises, adverse external factors had also a role in explaining crises.

Was Alberdi right? The empirical evidence so far seems to confirm his hypothesis. Howeverfurther research is necessary to fully confirm that all crises Argentina went through are alike.

RREEFFEERREENNCCEESS

Agenor, Pierre-Richard, Bhandari, Jagdeep and Flood, Robert (1992) Speculative attacks and models of balance-of-payment crises. Staff Papers, Vol. 39.

Alberdi, Juan Bautista (1998) Escritos Pstumos. Estudios Econmicos. Tomo I. Universidad Nacional de Quilmes.

mbito Financiero (1984) Suplemento Especial del 14 de Mayo de 1984.

Banco Central de la Repblica Argentina. Memoria Anual. Various Issues

Banco Central de la Repblica Argentina. Suplemento Estadstico de la Revista Econmica. Various issues.

Blanco, Herminio and Garber, Peter (1986). Recurrent devaluations and speculative attacks on the Mexican Peso.Journal of Political Economy, Vol. 94 (1), pp. 148-166.

Bordo, Michael and Vegh, Carlos (1998) What if Alexander Hamilton had been Argentinean. A comparison of earlymonetary experiences of Argentina and the United States. NBER Working Paper N 6862.

Burgin, Miron (1975)Aspectos Econmicos del Federalismo Argentino. Editorial Solar/Hachette. Buenos Aires.

Calvo, Guillermo and Fernndez, Roque (1982) Pauta Cambiaria y Dficit Fiscalin Fernndez, R. and Rodriguez,C. (Editors) Inflacin y Estabilidad. Ediciones Macchi, Buenos Aires.

Cerro, Ana Mara (1999) La conducta cclica de la economa Argentina y el comportamiento del dinero en el cicloeconmico. Argentina 1820-1998. Tesis de Magster indita (Universidad Nacional de Tucumn)

Corts Conde, Roberto (1989) Dinero, Deuda y Crisis. Evolucin Fiscal y Monetaria en la Argentina.Buenos Aires.


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Table 1 A. Panel A. Cris es Charac teris tics : 1826 1913.Annual Data

Exchange rate International Reserves Market Turbulence Index

Trough Peak Peak TroughCrisis

$/U$S Year $/U$S Year

Change %

mm Year mm Year

Change% I > 3 I > 2 I > 1.5 I > 1 I > 0.5

Crisis Type

1826/27 1 1825 3.53 1827 -71.7 2 Very Deep

1829/30 3.13 1828 7.13 1830 -56.1 1 1 Mild

1839/40 9.19 1838 23.33 1840 -60.6 1 1 Deep

1846 15.55 1845 22.66 1846 -31.4 1 Mild

1876 25.0 1875 26.44 1876 -5.4 130900 1875 42700 1876 -67.4 1 Mild

1885 1 1884 1.37 1885 -27.0 200000 1884 427500 1885 113.8 1 Deep

1889/91 1.35 1887 3.74 1981 -63.9 172000 1887 122750 1891 -28.6 1 1 1 Very Deep


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Table 1 A. Panel B.Cris es Charac teris tics : 1914 2002.Monthly Data

Exchange Rate International Reserves Interest Rate Crisis breath Market Turbulence Index

Trough Peak Peak Trough Trough PeakCrisis

$/U$S month $/U$S month

Change %

mm month mm month

Change %% Month % Month

Change % Begining End # months I > 3 I > 2 I > 1.5 I > 1 I >

CrisisType

1914 2351 Mar-14 2368 May-14 -0.72 232.1 Apr 14 196.39 Jul-14 -15.39 7.50 Apr 14 8.75 Aug 14 16.7 May-14 Jul-14 3 0 2 0 0 1 Deep

1918/19 2224 May-18 2227 Apr 19 -0.13 383.2 Feb-19 379 Aug 18 1.11 5.88 Jul-18 7.50 Apr 19 27.6 Aug 18 Apr 19 10 0 1 2 0 1 Mild

1920/21 2330 Apr 20 3454 Jul-21 -32.54 470.6 Jul-20 470.6 May-21 0.00 7.38 Oct-20 8.13 Apr 21 10.2 Jul-20 May-21 11 0 0 1 1 5 Mild

1929/31 2375 Jan 29 4260 Oct-31 -44.25 502.6 Jan 29 256.9 Feb-32 -48.88 6.13 Dec 28 7.87 May-31 28.4 Mar-29 Dec 31 22 3 6 1 6 4 VeryDeep

1937/38 3291 Jun-37 3903 Apr 38 -15.68 476.4 Jun-37 343.1 apr 38 -27.99 5.14 Oct-37 5.75 Jan 39 11.9 Mar-37 Apr 38 14 0 0 0 4 5 Mild

1948/49 475 Apr 48 1650 Nov-49 -71.21 3737 Feb-48 2067 Jul-49 -44.69 Mar-48 Nov-49 16 1 1 2 2 2 Deep

1951 1374 Jun-50 2950 Sep-51 -53.42 2689 Dic-50 1866 Dic-51 -30.61 Jan 51 Aug 51 8 0 1 0 2 1 Mild

1955 2700 Sep-55 4500 Jan 56 -40.00 Oct-55 Jan 56 4 0 0 1 0 3 Mild

1958 3720 Dec 57 7350 Oct-58 -49.39 461120 May-57 101270 Oct-58 -78.04 Jan 58 Oct-58 10 1 1 1 1 2 Deep1962 8420 dec 61 14840 Nov-62 -43.26 497765 Ago-61 120865 Oct-62 -75.72 jan 62 Oct-62 10 1 1 0 0 5 Deep

1964 /65 14040 May-64 28570 Jul-65 -50.86 321365 May-64 117180 Jun-65 -63.54 Jun-64 Jun-65 13 0 1 2 0 5 Mild

1971 41750 Feb-71 97750 Nov-71 -57.29 743825 Oct-71 194289 Jun-72 -73.88 Jun-71 Jul-72 14 0 2 2 2 3 Deep

1975 /76 14 Jun-74 333.5 Mar-76 -95.80 1536531 May-74 293346 Aug 75 -80.91 Jul-74 Mar-76 21 2 4 2 5 2 VeryDeep

1981/82 1986.5 Dec 80 61568.2 Nov-82 -96.77 7343.891 Jul-80 2425.136 Nov-82 -66.98 4.31 Oct-80 10.82 Jul. 81 151.04 Dec 80 Nov-82 24 1 2 1 6 1 Deep

1983/84/85

94650 May-83 9520454.6 Aug 85 -99.01 3244.84 Jan 82 973.53 Feb-85 -70.00 10.00 May-83 31.40 May-85 214.00 Jul-83 Apr 85 22 0 0 5 3 6 Mild

1986/87/88

8951.0526 Jun-86 143100 Sep-88 -93.74 3718.56 May-86 958.39 Ago-87 -74.23 4.20 Jun-86 19.30 Jul-88 359.52 Aug 86 Jun-88 23 0 3 0 3 5 Deep

1989/90/91

143100 Sep-88 98790000 May-91 -99.86 2652.47 Nov-88 898.91 Jan 90 -66.11 8.35 Sep-88 83.20 Jun-89 896.41 Jan 89 Feb-91 26 11 1 0 2 1 VeryDeep

1995 1 Dec 94 1 Mar-95 0.00 9967.07 Nov-94 5958.6 Apr 95 -40.22 0.60 Oct-94 1.50 Apr 95 150.00 Dec 94 Mar-95 4 0 2 2 0 0 Deep

2001/02 1 May-01 3.69 Nov-02 -72.87 27547 Sep-00 9031 Oct-02 -67.22 0.58 Aug 00 4.86 Jul-02 737.93 Oct-00 Oct-02 25 9 1 1 2 4 VeryDeep

Note: the rate of growth of exchange rates and international reserves were computed from a peak to trough, considering the behavior of these variables six months before andafter the signal given by the Market Turbulence Indexannounces the beginning and end of the crisis.


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Figure 1 A. Market Turbulence Index

-20

-10

0

10

20

30

40

1914

1939

1964

1989

crisis Market Turbulence Index

Documents

Cerro Meloni