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Making Explosive Cocktails: recipes and costs for 26 Crises from 1823 to 2003

Author

Listed:
  • Néstor Adrián Amado

    (UNSTA)

  • Ana María Cerro

    (UNSTA & Universidad Nacional de Tucumán, Argentina)

  • Osvaldo Meloni

    (Universidad Nacional de Tucumán, Argentina)

Abstract

Crises, like “explosive cocktails” are made by mixing powerful ingredients. Argentina has made 26 “explosive cocktails” since 1823. How many ingredients are needed to make an “explosive cocktail”? Which are these ingredients? Which is the most expensive mix? This paper attempts to identify the different recipes that ended up in economic crisis throughout argentine economic history by means of the regression tree analysis technique. The paper also measures Argentina’s crises costs in terms output losses. We follow the methodology used by the IMF (1998), that is, computing cumulative output lost relative to trend. It is found that there are four explosive mixes, having Fiscal Deficit, Real Exchange Rate Overvaluation, Bank Deposit growth rate decline and the ratio of External Debt to Exports as the key ingredients. The most frequent crises are those having high fiscal deficit; though average cost is higher for crises mixing moderate fiscal with strong decline in Real Bank Deposits, presumably entailing banking crises.

Suggested Citation

  • Néstor Adrián Amado & Ana María Cerro & Osvaldo Meloni, 2005. "Making Explosive Cocktails: recipes and costs for 26 Crises from 1823 to 2003," Economic History 0510001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpeh:0510001
    Note: Type of Document - pdf; pages: 20
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/eh/papers/0510/0510001.pdf
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    References listed on IDEAS

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    1. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    2. Douglass C. North, 1991. "Institutions," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 97-112, Winter.
    3. Graciela L. Kaminsky, 2003. "Varieties of Currency Crises," NBER Working Papers 10193, National Bureau of Economic Research, Inc.
    4. Barry Eichengreen & Michael D. Bordo, 2003. "Crises now and then: what lessons from the last era of financial globalization?," Chapters, in: Paul Mizen (ed.), Monetary History, Exchange Rates and Financial Markets, chapter 3, Edward Elgar Publishing.
    5. Marina Halac & Sergio L. Schmukler, 2004. "Distributional Effects of Crises: The Financial Channel," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2004), pages 1-67, August.
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    Cited by:

    1. Catelén, Ana Laura, 2020. "Growth constraints and external vulnerability in Argentina," Nülan. Deposited Documents 3471, Universidad Nacional de Mar del Plata, Facultad de Ciencias Económicas y Sociales, Centro de Documentación.

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    More about this item

    Keywords

    Currency Crises; Regression Tree Analysis; Crises Costs;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business

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