Monetary dilemmas: Argentina in MERCOSUR

Abstract The deep economic crisis of Argentina has been causing an active quest for conclusions of topical or general importance. Indeed, an experience of this kind is likely to generate useful lessons for macroeconomic theory and policy design. Some of them may be simple and straightforward (e.g.: under strong uncertainty, the arguments for precautionary savings should apply particularly to fiscal policies). However, we believe that the questions raised hardly lend themselves to trivial answers. In this paper, we propose to undertake a brief (and certainly, partial and preliminary) discussion of the problems related to the design and administration of a monetary regime in an economy such as that of Argentina; in the last section, we refer to the regional spillovers generated within the Mercosur area. The ultimate aim is to present arguments that may be of practical use. But we do not intend to push forward a particular prescription, or to analyze in depth the available alternatives. Rather, our interest is try to discuss conditions and parameters which can affect the choice of monetary policies in what seems to be a rather complex case.