G aña-Colella, San iago; Ve nengo, Ma ías
A icle
Cu ency subs i u ion in A gen ina, 2003-2019: An
e alua ion o al e na i e explana ions
PSL Qua e ly Re iew
P o ided in Coope a ion wi h:
Associazione Economia ci ile, Rome
Sugges ed Ci a ion: G aña-Colella, San iago; Ve nengo, Ma ías (2024) : Cu ency subs i u ion in
A gen ina, 2003-2019: An e alua ion o al e na i e explana ions, PSL Qua e ly Re iew, ISSN
2037-3643, Associazione Economia ci ile, Rome, Vol. 77, Iss. 310, pp. 313-327,
h ps://doi.o g/10.13133/2037-3643/18652
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ol. 77 n. 310 (Sep embe 2024)
Cu ency subs i u ion in A gen ina, 2003-2019:
An e alua ion o al e na i e explana ions
SANTIAGO GRAÑA-COLELLA, MATÍAS VERNENGO
Abs ac :
Cu ency subs i u ion de ined as he use o o eign
cu ency in he domes ic economy is a ela i ely common
phenomenon in de eloping coun ies. While mains eam
economics has analyzed i in some de ail, he same is no
he case in he e odox economics. This pape p oposes an
analy ical app oach o e alua e he e ec s o cu ency
subs i u ion and i s ela ionship wi h exchange a e
dynamics; i p o ides an empi ical in es iga ion o
o hodox and al e na i e iews o he case o A gen ina.
The o hodox iew emphasizes he ole o iscal de ici s
inanced by mone a y emissions, while al e na i e iews
emphasize he impo ance o ex e nal ulne abili ies,
bo h associa ed wi h cu en and inancial accoun
de ici s as he sou ce o cu ency subs i u ion. We ind
some suppo in a o o he al e na i e o he e odox
pe spec i e on cu ency subs i u ion o dolla iza ion.
G aña-Colella: Na ional Uni e si y o Ma del Pla a; Na ional
Uni e si y o Gene al San Ma ín (A gen ina); AAU,
email: san ig [email protected]
Ve nengo: Bucknell Uni e si y, USA,
email: m. e [email protected]
How o ci e his a icle:
G aña-Colella S., Ve nengo M. (2024), “Cu ency subs i u ion
in A gen ina, 2003-2019: An e alua ion o al e na i e
explana ions”, PSL Qua e ly Re iew, 77 (310), pp. 313-327.
DOI: h ps://doi.o g/10.13133/2037-3643/18652
JEL codes:
B50, O50, O54
Keywo ds:
cu en he e odox app oaches, economic de elopmen , La in
Ame ica
Jou nal homepage:
h p: //www.pslqua e ly e iew.in o
Cu ency subs i u ion is an impo an p oblem in many de eloping coun ies. The e is a
conside able li e a u e on he subjec , bu i is mos ly om a mains eam app oach. The
mains eam and he he e odox/ adical app oaches o economics ha e signi ican di e ences—
he same applies o cu ency subs i u ion. We de elop an explana ion o he heo e ical
di e ences be ween o hodox and he e odox heo y and, gi en he p esence o his phenomenon
in he case o A gen ina, p o ide an empi ical assessmen o bo h app oaches ha p o ides some
p elimina y e idence abou he ela i e impo ance o bo h app oaches.
In he case o A gen ina, he o hodox iew is ha le o cen e o populis go e nmen s ha e
inc eased go e nmen spending and un iscal de ici s by inc easing he money supply, which has
led o in la ion. In his iew, cu ency subs i u ion is simply a ligh o sa e y. Al e na i e iews
emphasize he ex e nal p oblems— ela ed o he absence o dolla s—in a coun y ha de aul ed
in 2002, enego ia ed i s o eign deb wice (in 2005 and 2010), ha only sol ed he ex e nal deb
p oblem wi h he holdou s o Vul u e Funds in 2016, and was o ced o eimpose capi al con ols
as he sou ce o cu ency subs i u ion. In pa icula , hese iews emphasize he ac ha hese
p oblems occu ed unde bo h populis and neolibe al go e nmen s, since he la e agg a a ed
Special issue on s uc u al change, social inclusion, and en i onmen al sus ainabili y
314 Cu ency subs i u ion in A gen ina, 2003-2019: An e alua ion o al e na i e explana ions
PSL Qua e ly Re iew
he ex e nal p oblems, and e en hough i li ed he capi al con ols in 2016, i was o ced o
eimpose hem in 2018 in he con ex o an In e na ional Mone a y Fund (IMF) p og am.
The emainde o his pape is di ided in o i e sec ions. Fi s , we schema ically p esen bo h
o hodox and he e odox heo ies on exchange a e de e mina ion and cu ency subs i u ion.
Then, we p o ide a b ie desc ip ion o he p ocess o cu ency subs i u ion o dolla iza ion in he
A gen inian economy and p o ide a possible poli ical economy explana ion o he pe sis ence o
ha phenomenon, which does no depend on he poli ical pa y in powe . In he subsequen
sec ions we explain he me hodology and da a sou ces used; he a iables selec ed o he
es ima ion a e p esen ed, ollowed by he esul o ou es ima i es. A b ie conclusion sugges s
ha he he e odox app oach p o ides a sligh ly be e explana ion o he dolla iza ion
phenomenon in A gen ina.
1. Al e na i e iews o cu ency subs i u ion
The con en ional/o hodox explana ion o cu ency subs i u ion is ela i ely well de eloped and
p o ides he basis o unde s anding cu ency c ises, while he e is— o some deg ee—a lack o
al e na i es in he he e odox iew.
1
In his ega d, o hodox li e a u e is mo e cohe en , while
he e odox conside a ions on cu ency subs i u ion a e agmen ed and do no p o ide a clea
consensual app oach. We y o p o ide a simple analy ical p esen a ion o a possible he e odox
app oach.
Rega ding he o hodox iew, he mos equen ly quo ed de ini ion o cu ency subs i u ion
is ound in Cal o and Vegh (1992, p. 1). They sugges ha cu ency subs i u ion is: “ he use in a
gi en coun y o mul iple cu encies as media o exchange.” Mo e p ecisely, cu ency subs i u ion
(CS) is he las s age o he dolla iza ion p ocess whe e he domes ic cu ency had p e iously los
he adi ional unc ions o money as medium o exchange, s o e o alue, and uni o accoun .
Howe e , mo e ecen mains eam wo k has shi ed he a en ion om o eign cu ency as a
medium o exchange o a b oade ocus on he impo ance o asse s denomina ed in o eign
cu ency wi hin he domes ic economy (Ize and Le y-Yeya i, 2003; MacDonald, 2006).
The o igins o CS ha e been cha ac e ized h ough di e en explana o y a iables in he
mains eam li e a u e. In some accoun s, CS may be gene a ed by high and ola ile in la ion le els
(Cal o and Vegh, 1992; Kumamo o and Kumamo o, 2014; Rojas-Sua ez, 1992), inc easing
dep ecia ion expec a ions (Rojaz-Sua ez, 1992) and he deg ee o inancial libe aliza ion (Cal o
and Vegh, 1992). Conce ning he e ec o CS on exchange a e de e mina ion, he con en ional
a gumen wi hin he o hodox li e a u e is ha his phenomenon inc eases exchange a e
ola ili y (Akçay e al., 1997). Pa icula ly, keeping in e es a e di e en ials cons an , he a e o
dep ecia ion is de e mined by he in la ion di e en ials, ollowing he pu chasing powe pa i y
(PPP) heo y (ibid.).
2
Acco ding o Akçay e al., he deg ee o which he in la ion di e en ial
inc eases he dep ecia ion a e is exace ba ed in he con ex o CS since economic agen s shi
om one cu ency o he o he mo e quickly.
1
Gi on and Rope (1976, p. 1) p o ide he seminal pape on cu ency subs i u ion, which hey de ine as: “ he deg ee
ha cu encies a e subs i u es in he po olios o ul ima e weal h holde s.” No e ha he con en ional heo y o
cu ency c ises, de eloped by K ugman (1979), explici ly ci es he wo k by Gi on and Rope on cu ency subs i u ion.
The only o maliza ion o an al e na i e model o cu ency c ises, as a as we know, is Cline and Ve nengo (2016).
2
No e ha e en i one akes he in e es a e di e en ials, he e is an equi alency be ween PPP and he Wicksellian
no ion o an exchange a e de e mined by he equilib a ion o he na u al a e o in e es be ween coun ies (Ve nengo,
2001).
S. G aña-Colella, M. Ve nengo 315
PSL Qua e ly Re iew
As we men ioned be o e, he he e odox li e a u e on cu ency subs i u ion is limi ed and is
o en pa o a b oade analysis ocused on cu ency so e eign y and policy space. In pa icula ,
acco ding o ecen de elopmen s wi hin mode n money heo y (MMT), ollowing Keynes, a
so e eign cu ency would be one ha possesses he ollowing ou cha ac e is ics: he cu ency
mus be de ined as uni o accoun by he go e nmen , he go e nmen mus se obliga ions, hese
obliga ions mus be denomina ed in he uni o accoun p e iously de ined, and deb mus be
denomina ed in his cu ency (W ay, 2015).
3
In addi ion, W ay adds ha a coun y should pu sue
a lexible exchange a e egime. Unde hese ci cums ances MMT au ho s sugges he e would be
no need o CS. C i ics o MMT ha e a gued ha , e en in lexible egimes, when cen al banks se
in e es a es, hey indi ec ly a ec he exchange a e, and, in pa icula in de eloping coun ies—
who ace an ex e nal cons ain — he cen al bank ends up managing he exchange a e. In hese
cases, he e is o en a managed o di y loa exchange a e egime.
4
Besides, mos c i ics would
be skep ical abou he possibili y o dep ecia ions esol ing he ex e nal cons ain p oblems
while main aining ull employmen policies. Unde hese ci cums ances, he possibili y o CS
appea s in less de eloped coun ies, e lec ing he impossibili y o bo owing in domes ic
cu ency in in e na ional ma ke s, a phenomenon known as o iginal sin in he li e a u e.
The main di e ence be ween he o hodox and he e odox iews on CS is ela ed o he causal
mechanism connec ing he subs i u ion o o eign o domes ic cu ency. Mos o hodox
dolla iza ion heo e ical models ollow wha could be labelled a Mone a is app oach and accep
bo h he quan i y heo y o money (QTM) and PPP heo y. The e o e, money supply o base (MB),
h ough i s e ec s on domes ic p ices, should de e mine he nominal exchange a e (NER). In
addi ion, bo h in la ion and exchange a e expec a ions lead o dolla iza ion o cu ency
subs i u ion (CS). Finally, dolla iza ion dec eases he le el o in e na ional ese es (RES), which
migh be seen as he ha binge o a cu ency c isis. Causali y can be exp essed as ollowing his
pa e n:
MB NER CS RES
The he e odox app oach on cu ency subs i u ion implies ha inc eases in dolla iza ion o
asse s should dec ease he le el o in e na ional ese es held by he cen al bank. CS esul s om
a nega i e in e es a e di e en ial – ha is, domes ic nominal in e es a es lowe han he sum
o ex e nal in e es a e plus he isk p emium, plus he expec ed nominal de alua ion o he
domes ic cu ency. This is wha makes i ad an ageous o main ain asse s in dolla s and explains
he all in dolla ese es. In addi ion, his dec ease in he le el o ese es leads o p essu es on
he balance o paymen s, which gene a es he exchange a e dep ecia ion. Finally, he
dep ecia ion o he exchange a e is in la iona y, and he money supply endogenously esponds
o he highe p ice le el. Causali y is as ollows:
CS RES NER MB
3
In his sense, he he e odox concep o cu ency di e s om he mains eam one, since he o me is ocused on he
ole o uni o accoun o money, while he la e is ocused on he ole o medium o exchange. Also, o he MMT
app oach so e eign y is a poli ical phenomenon ha can be de ined by he s a e (P a es, 2020), while o he
mains eam app oach he p ocess o dolla iza ion and cu ency subs i u ion is he ou come o he a ional ac ions o
independen economic agen s.
4
While sha ing he poli ical conside a ions o so e eign y many c i icisms ha e been aised by o he pos -
Keynesian/S uc u alis au ho s o he MMT app oach. See La oie (2013) and Ve nengo and Pé ez Calden ey (2020).
316 Cu ency subs i u ion in A gen ina, 2003-2019: An e alua ion o al e na i e explana ions
PSL Qua e ly Re iew
In o he wo ds, while CS is he esul o a p ocess ha is ul ima ely caused by domes ic
decisions, and is ollowed by educed ese es, he dep ecia ion o he domes ic cu ency and
in la ion, he o igin o he p oblem is s uc u al, ela ed o lack o a so e eign cu ency and he
ex e nal cons ain , which a e a he oo o he need o ex e nal ese es. This simple line o
e e se causali y allows us o empi ically analyze he ele ance o bo h app oaches. In he
ollowing sec ion, we b ie ly discuss he A gen inean expe ience.
2. Key economic ea u es o he pos -cu ency boa d e a
Du ing Nés o Ki chne ’s adminis a ion (2003-2007), in a ela i ely posi i e in e na ional
en i onmen wi h high commodi y p ices ha a o ed expo s and educed he ex e nal
p oblems, a se ies o expansiona y mac oeconomic policies and edis ibu i e policies ha
inc eased eal wages we e applied (Amico, 2013; Kul as, 2008). The economy was coming ou o
he Con e ibili y c isis o 2001-2002, when ex e nal de aul and pesi ica ion o he economy we e
o ced by one o he wo s c ises in he coun y’s his o y. In e es ingly enough, du ing his pe iod,
cu ency subs i u ion o dolla iza ion inc eased signi ican ly, a leas when measu ed as he sha e
o o eign cu ency deposi s o e M2 ( igu e 1).
The measu e is a simpli ied one, and i is clea ha i unde es ima es he CS phenomenon,
since he isk associa ed wi h deposi s in dolla s is well known o A gen ineans, who ha e su e ed
p e ious p ocess o pesi ica ion o banking accoun s. A any a e, he index p o ides a i s
app oxima ion o he p oblem, and i would be easonable o assume ha i he dolla iza ion o
banking deposi s wen up, he e would be also he case wi h b oade measu es o dolla iza ion.
Figu e 1 - Cu ency subs i u ion o he pe iod 2003-2019
Sou ce: based on Cen al Bank o he A gen inian Republic (BCRA) (2024; a ailable online).
0
0,05
0,1
0,15
0,2
0,25
0,3
0,35
0,4
I-2003
VII-2003
I-2004
VII-2004
I-2005
VII-2005
I-2006
VII-2006
I-2007
VII-2007
I-2008
VII-2008
I-2009
VII-2009
I-2010
VII-2010
I-2011
VII-2011
I-2012
VII-2012
I-2013
VII-2013
I-2014
VII-2014
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VII-2015
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VII-2016
I-2017
VII-2017
I-2018
VII-2018
I-2019
VII-2019
S. G aña-Colella, M. Ve nengo 317
PSL Qua e ly Re iew
Du ing he subsequen adminis a ion o C is ina Ki chne (2007-2015), he coun y s a ed
o ace he e ec s o he balance o paymen cons ain in i s p ocess o economic g ow h along
wi h he e ec s o he 2008 in e na ional inancial c isis, in pa icula a e 2011 when he limi s
o he cu en accoun had been eached (Kul as, 2014; Manzanelli and Basualdo, 2016). Faced
wi h inc easing capi al ligh and lowe ex e nal ese es, he go e nmen op ed o implemen
con ols in he o eign exchange ma ke in 2011, which led empo a ily o a educ ion o
dolla iza ion, as can be obse ed in igu e 1. Howe e , a he end o 2015, wi h he elec ion o
Mau icio Mac i, and he elimina ion o capi al con ols, dolla iza ion o banking deposi s wen up
again.
Mac i libe alized he exchange a e ma ke , o uni y he o icial and pa allel a es, and he
cen al bank adop ed an in la ion a ge ing policy o con ol in la ion. In he con en ional iew,
his would lead o educe mone a y emissions, lowe in la ion, a mo e s able exchange a e and
educed dolla iza ion le els. Howe e , his policy did no s op he pe sis en dep ecia ion o he
exchange a e, bo h o he o icial and he pa allel exchange a e, o dolla blue, ha eme ged in
2011 once capi al con ols we e implemen ed. In ac , dep ecia ion and dolla iza ion inc eased
du ing Mac i’s adminis a ion. Pa icula ly, du ing his adminis a ion, he libe aliza ion o he
inancial and exchange a e ma ke s led o he de elopmen o a ca y ade sys em, which led o
an inc ease in capi al ligh (Ba e a and Bona, 2018; Da id, 2019). Fo ou pu poses, i is clea
ha he p ocess o CS expanded in A gen ina since he end o Con e ibili y in 2002, and ha i
accele a ed in he las decade, in pa icula since 2015.
I is impo an o no e ha since he ex e nal p oblems became mo e acu e, when he ex e nal
cons ain associa ed wi h cu en accoun imbalances, pe sis en capi al ligh , and low le els o
ese es held by he cen al bank became ch onic, he A gen ine economy was unable o g ow,
wi h he a e age g ow h a e being 0.5% pe yea . In o he wo ds, he economy has s agna ed o
mo e han a decade. Al hough hese p oblems became mo e acu e s a ing in 2011, when a le o
cen e go e nmen was in powe , hey pe sis ed wi h changes in he poli ical landscape.
3. The poli ical economy o dolla iza ion in A gen ina
In he con en ional iew, he deg ee o CS should be e y di e en in le and igh o cen e
go e nmen s, since he la e would be mo e conce ned wi h in la ion, would con ol money
supply, and main ain highe in e es a es, which should p eclude in la ion, dep ecia ion and
dolla iza ion. The opposi e is expec ed o le o cen e go e nmen s. Ye , in A gen ina
dolla iza ion inc eased wi h bo h he Nés o and C is ina Ki chne go e nmen s, and wi h
Mau icio Mac i go e nmen . In ou iew, he nega i e in e es a e di e en ial, ha is, domes ic
nominal in e es a es lowe han he sum o ex e nal in e es a e plus he isk p emium, plus he
expec ed nominal de alua ion, was he cause o dolla iza ion in bo h pe iods. In he case o
A gen ina his in e es a e di e en ial has been almos always nega i e, as shown in igu e 2. This
made i a ional o choose o main ain asse s in dolla s and explains he all in dolla ese es.
Nega i e nominal in e es a e di e en ials a e he aison d'ê e o dolla iza ion, and hese,
in A gen ina, ha e been main ained bo h by le o cen e populis go e nmen s, and by hose
seeking a neolibe al al e na i e. Tha is, a guably, he only common poin be ween hese wo
g oups. Bu he easons o he low a es ha gene a e nega i e emune a ion di e en ials a e
based on al e na i e poli ical easons.
Among he le o cen e g oups wi hin he Pe onis pa y, close o C is ina Ki chne , and o
a good pa o he he e odox economis s, low domes ic in e es a es a e seen as a way o educe
318 Cu ency subs i u ion in A gen ina, 2003-2019: An e alua ion o al e na i e explana ions
PSL Qua e ly Re iew
he e u ns o inancial capi al and as a necessa y condi ion o p omo e he expansion o he
economy and a be e dis ibu ion o income. A hike in in e es a es, i is p esumed, would ha e
a nega i e e ec on c edi and on business in es men and on economic ac i i y. Howe e , p i a e
in es men is no a unc ion o he in e es a e, bu a he depends on he expec ed e ec i e
demand. In addi ion, he go e nmen could always subsidize c edi h ough public banks.
Figu e 2 - In e es a e di e en ial 2007-2019
Ano he g oup, he so-called New De elopmen alis s, see a dep ecia ed o compe i i e and
s able eal exchange a e as a p econdi ion o indus ial g ow h and de elopmen , and hey
assume ha high in e es a es would ha e he e ec o educing he pace o nominal exchange
a e de alua ions, leading o an o e alua ion o he eal exchange a e, educing expo s, wi h
nega i e e ec s on g ow h. The pe cep ion, in his iew, is ha he dep ecia ed eal exchange a e
is a o able o g ow h, bu since he e is wage esis ance, in compensa ion he e would be a highe
in la ion.
Bu he e is ano he mo e ele an adeo o unde s and he A gen ine si ua ion, which is
no be ween a dep ecia ed eal exchange a e o g ow and an app ecia ed exchange a e o
s abilize and keep p ices unde con ol. The cen al adeo is dis ibu i e, be ween he exchange
a e and wages, a adeo ha cas s doub on he posi i e e ec o he dep ecia ed eal exchange
a e on g ow h. In coun ies ha p edominan ly expo commodi ies, which a e p ice ake s in
in e na ional ma ke s, he eal exchange a e has li le e ec on he olume expo ed
5
. The main
e ec o he dep ecia ion o he eal exchange a e is dis ibu ional. A cu ency dep ecia ion has
5
See Cue as-Ahumada (2011) and Zack and Dale (2015) o he case o A gen ina.
0
20
40
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140
2007-12-01
2008-05-01
2008-10-01
2009-03-01
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2011-04-01
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2013-05-01
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2016-04-01
2016-09-01
2017-02-01
2017-07-01
2017-12-01
2018-05-01
2018-10-01
2019-03-01
2019-08-01
Adjus ed In e es Ra e Domes ic In e es Ra e
S. G aña-Colella, M. Ve nengo 319
PSL Qua e ly Re iew
con ac iona y e ec s on he economy, no only in he le el o ac i i y, bu also on he a e o
g ow h, because i educes eal wages. The wo sening o he posi ion o wo ke s – who ha e a
g ea e p opensi y o spend – implies, o equi alen le els o au onomous spending, lowe le els
o e ec i e demand and induced in es men .
I would be expec ed ha , among he mo e conse a i e g oups, he conce n wi h in la ion
would lead hem o ha e he opposi e pe spec i e on he in e es a e (Le y-Yeya i e al., 2012).
And i is ue ha once he economy had begun o eco e in 2017, he A gen ine Cen al Bank
aised a es o s op he in la iona y accele a ion in he i s yea s o he Mac i go e nmen . In ac ,
in Decembe 2015, an in la ion a ge ing egime was es ablished, acco ding o which he cen al
bank would aise he in e es a e when in la ion was abo e he a ge . A he beginning o 2016,
he basic in e es a e was b ie ly abo e he o eign a e adjus ed o isk, bu ha was sho li ed
(see igu e 2).
This p esen ed wo p oblems o he hen go e nmen . On he one hand, a high in e es a e
was seen – by hese neolibe al g oups – as con ac iona y due o i s p esumed e ec s on p i a e
in es men . Bu his p o ed o be inco ec and in ac p i a e ac i i y and in es men inc eased
in 2017 despi e he inc ease in he eal in e es a e. On he o he hand, a he end o 2017 he
go e nmen o ced he cen al bank o u he educe he in e es a e o s imula e u he
dep ecia ion, in pa o p omo e lowe eal wages.
The esul o he educ ion o he in e es a e, in combina ion wi h he highe adjus ed
ex e nal a es, was he accele a ion o capi al ligh , and he dec ease in in e na ional ese es,
leading o a un on he cu ency. The go e nmen was o ced o seek inancing om he IMF,
lea ing a si ua ion close o a de aul . Ul ima ely all g oups, on he le and on he igh , saw low
in e es a es as necessa y o a any a e as no being ins umen al in explaining dolla iza ion. The
le o he mos pa explained i as a cul u al phenomenon, while he igh saw i undamen ally
as a esul o money p in ing and he iscal de ici s ha caused i , e en hough some also
emphasized he cul u al endency o A gen ines o sa e in dolla s.
4. Da a and es ima ion s a egy
Se e al s udies assessing he ela ionship be ween exchange a e and cu ency subs i u ion o
he A gen inean case can be ound in mains eam li e a u e ( able 1). On he o he hand, we ound
no p e ious empi ical wo k conce ned wi h he he e odox app oach. Mos s udies assess he
ela ionship be ween exchange a e ola ili y and CS a iables h ough he es ima ion o
au o eg essi e condi ional he e oskedas ici y (ARCH) o gene alized au o eg essi e condi ional
he e oskedas ici y (GARCH) models. Cu ency subs i u ion does no appea as an explana o y
a iable in s udies o he es ima ions o exchange a e de e mina ion. Mos o hese pape s, which
accep PPP heo y, y o ind long e m ela ionships be ween ela i e p ices and exchange a e
h ough coin eg a ion es s, ec o e o co ec ion (VEC) models and/o pe o ming uni oo
es s (Aca , 2020; Dal Bianco, 2008; Holmes, 2008; Uz and Bildi , 2009). Addi ionally, he e is a
se ies o s udies ha ollow a simila me hodology and heo e ical amewo k, bu hei ocus is
on he e ec ha he commodi y p ice boom had on he exchange a e de e mina ion o
de eloping coun ies (Aizenman e al., 2012; Ahumada and Co nejo, 2015).
6
6
See all he s udies in able 1.
320 Cu ency subs i u ion in A gen ina, 2003-2019: An e alua ion o al e na i e explana ions
PSL Qua e ly Re iew
Table 1 - P e ious s udies on exchange a e de e mina ion o he A gen inian case o s udy
Wo k
Time
F ame*
Me hodology
Va iables
Dependen
Va iable
He e odox
Aizenman,
Edwa ds and
Rie a-C ich on
(2012)
1970-2007q
Coin eg a ion
Analysis
Commodi y e ms o ade; wo ld
in la ion, go e nmen expendi u e; ade
openness, in e es a e sp eads, g oss
p i a e capi al lows
RER
NO
Ahumada and
Co nejo
(2015)
1993-2013q
VEqCM
Expo s, commodi y p ices, eal exchange
a e, ag icul u e GDP, domes ic
consump ion, oil impo s, GDP, oil p ices
RER
NO
Dal Bianco
(2008)
1900-2006a
Coin eg a ion
Analysis
RER, p ices and wholesale p ice index
RER
NO
Aca (2020)
2004-2018q
ARDL
INTd, GDP di e en ials, money supply
di e en ials
NER
NO
Holmes (2008)
1973-2005q
MS-ADF
RER
RER
NO
Uz Akdogan
and Dalan
Bildi (2009)
1977-2006q
Coin eg a ion
Analysis; VEC
P ice di e en ial, INTd, eal income
di e en ial and money supply di e en ial
NER
NO
* The le e s nex o he ime ame e e o he equency o he da a, whe e a s ands o annual and q o qua e ly.
We es ima e a VAR model ha goes beyond he simple applica ion o coin eg a ion o uni oo
es s, allowing us o ob ain la ge amoun s o in o ma ion h ough impulse esponse unc ions
(IRFs) and o ecas ing e o s a iance decomposi ion (FEVDs). Mo eo e , he VAR me hodology
allows pe o ming he es ima ion o he model wi hou se ing he s uc u e o he model
be o ehand (Zack e al., 2018). Howe e , his me hodology is no ee o limi a ions. Pa icula ly,
di e en om coin eg a ion es s, his me hodology does no allow o s udy o long- un
ela ionships. In his ega d, a possible al e na i e would be o es ima e a VEC model, which
allows applying he al eady men ioned econome ic ools and s udying coin eg a ion
ela ionships. Ne e heless, he esul s o he uni oo es (see able A2 in he appendix) do no
allow he applica ion o his me hodology. Fu he mo e, ano he limi a ion o VAR models is ha
pa ame e s inc ease geome ically as mo e a iables and lags a e added (López Gal án, 2021;
S ock and Wa son, 2008) and, consequen ly, he possible numbe o con ol a iables o include
is educed.
The a iables included in he model ( able A1 in he appendix), beyond a cu ency subs i u ion
index and he exchange a e, include he in e es di e en ials be ween A gen ina and he Uni ed
S a es, he le el o ese es in o eign cu ency held by he Cen al Bank o A gen ina and he
money supply. The in e es a e di e en ial may ha e implica ions o bo h o hodox and
he e odox li e a u e on he opic unde analysis. Addi ionally, he le el o ese es is included in
S. G aña-Colella, M. Ve nengo 327
PSL Qua e ly Re iew
Ve nengo M. (2001), “Fo eign exchange, in e es and p ices: The con en ional exchange a e”, in Rochon L.-P. and
Ve nengo M. (eds), C edi , in e es a es and he open economy: Essays on ho izon alism (pp. 256-270), Chel enham
(UK) and No hamp on (MA, USA): Edwa d Elga .
Ve nengo M. and Pé ez Calden ey E. (2020), “Mode n money heo y (MMT) in he opics: Func ional inance in
de eloping coun ies”, Challenge, 63 (6), pp. 332-348.
W ay L. R. (2015), Mode n money heo y: A p ime on mac oeconomics o so e eign mone a y sys ems, New Yo k:
Sp inge .
Zack G. and Dalle D. (2015), “Elas icidades del come cio ex e io de la A gen ina: ¿Una limi ación pa a el c ecimien o?”,
Realidad Económica, 289, pp. 133-154.
Zack G., Mon ané M. and Kul as M. (2018), “Las causas del p oceso in laciona io en el siglo XXI”, in Kul as M. and Zack G.
(eds.), Pensa la economía a gen ina (pp. 49-72), Buenos Ai es: Siglo XXI edi o es.
