Arnoldshain Seminar XV
“The EU and Latin America Facing Globalization”
September 4 – 6, 2017

Caram, Santiago, University of CEMA, Welfare loss of exchange rate controls: The case of Argentina.
Along history, Argentina's multiple exchange rate system has created serious economic distortions. This last episode (2011-15) does not differ from previous experiences. For instance, we accounted that private external assets grew 37.7\% with respect to 2010 as well as dollarized deposits 0.75\% (on average) during 2011-16. Also, Black Market Premium reached a peak of 60.7\% in 2013. This paper describes the consequences of exchange rate controls in Argentina using a partial equilibrium model. On the one hand, ---in order to capture specific traits of the economy---, we used Zellner's approach to estimate import-price elasticities. On the other, we accounted that the natural rate of exchange rate (unified market) would have been at around 4.4-12 ARS per U.S. dollar. Additionally, trade openness could have been much larger without restrictions. Overall, the total efficiency loss caused by exchange rate regulations is estimated at about 1.6-6.7 percent of GDP in 2011-15.