Argentina´s Net Trade Development under an Exchange Rate Switch

Abstract

Argentina had a fixed exchange rate until January 2002 when the Argentinean banks allowed the peso to trade freely due to all the economic problems that the country underwent. This prompts us to find the impact of different macroeconomic variables on net export before and after an exchange rate regime change. The selected variables are Gross Domestic Product (GDP), interest rate, share price, inflation and exchange rate. An econometric model has been designed to predict this impact. The results showed that exchange rate regime change have a positive significant impact on the net export fluctuations. Our conclusion is that abandoning a direct peg relationship between an industrial country and a developing country does improve trade for the Argentina/USA case.