College of Behavioral & Social Sciences

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    The Origins and Legacy of a Currency Board in Argentina
    (2016) Elissetche, Martin M.; Soltan, Karol; Government and Politics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
    This is a qualitative case study of the adoption of a currency board in Argentina in 1991. It presents a discursive analysis and intellectual history of four overlaying and mutually influencing stories of Convertibility’s adoption. It is (1) the story of how Menem aligned himself to the Washington Consensus as a means to win a Presidential election. This ideological alignment influences and is influenced by a (2) reconstitution of the Peronist Party’s historically entrenched identity. This in turn re-fashion the whole system of interest articulation and relative power of interest groups in Argentina. The adoption of a currency board also marks the pace of (3) the entrenchment neoliberal interests across a domestic network of neoliberal think-tanks, technocrats, politicians, and “technopoles” articulating neoliberal interests outside of the Washington Consensus, within an International Neoliberal Network. Argentina’s adoption of a currency board falls in line with the Corner Solutions, a neoliberal doctrine promoted to influence developing countries to adopt two forms of exchange rate regimes that allow for less government involvement, including a currency board. Argentina starts as a test country and then becomes (4) an ideological stepping stone to help promote the creation of currency boards across more “developing” countries. These stories are not sequential but concurrent, and they help advance an alternative critique of neoliberalism that focuses on specifics to induce case-specific lessons versus a theory claiming to provide any universal truth.
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    Essays on Systemic Financial Crises, Default and Pecuniary Externalities
    (2013) Gondo Mori, Rocio; Korinek, Anton; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
    The first chapter analyzes how default externalities lead to an excessive incidence of systemic private debt crises. An individual defaulting borrower does not internalize that her default leads to a depreciation in the exchange rate because international lenders will sell any seizable assets and flee the country. The exchange rate depreciation in turn reduces the value of non-tradable collateral and induces other borrowers to default, leading to a chain reaction of defaults. The inefficiency of default spillovers can be corrected by strengthening the enforcement of creditor rights, so that private individual borrowers have less incentives to default, reducing the incidence of systemic default episodes. The second chapter analyzes the implications of developing financial markets for contingent assets on the degree of risk sharing, the incidence of systemic financial crises and credit externalities through collateral prices in emerging economies with limited access to international capital markets. We find that, in an environment with persistent shocks and collateral constraints, even though agents cannot engage in full risk sharing, access to state contingent assets improves the degree of hedging, reduces the need for precautionary savings and lowers the incidence of financial crises. In addition, it further reduces the spillover effect of credit externalities by dampening the effect of an individual's borrowing on the valuation of collateral of other borrowers.
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    Empirical Puzzles of Chilean Stabilization Policy
    (The World Bank Publications, 1998-03-05) Calvo, Guillermo A.; Mendoza, Enrique G.
    This paper reviews Chilean stabilization policy during the 1990s and argues that, while the merits of Chilean policy should be praised, there are four puzzles in conventional interpretations of the Chilean experience worth studying. First, the policy of targeting indexed interest rates does not coincide with a policy of targeting real interest rates. Second, there is no systematic link between the decline in inflation and the upward adjustments in indexed interest rates. Third, changes in the exchange rate and in the performance of the external sector help explain the decline in inflation. Fourth, the strong cyclical growth of the real economy was influenced in part by the large and persistent increase in the world price of Copper. We provide statistical evidence favoring these arguments using recursively-identified vector-autoregression models, and sketch a model of staggered pricing under indexation that sheds some light on the Chilean case.