Offsetting and Sterilization Mechanisms in Argentina (1992-2014)

2016. Credit and Capital Markets. Vol. 49, no. 4, pp. 515-534

25 Pages Posted: 2 Sep 2016 Last revised: 15 Feb 2020

See all articles by Carolyn Thomas

Carolyn Thomas

Metropolitan State University of Denver, Department of Economics, Students

Nicolas Cachanosky

Metropolitan State University of Denver; American Institute for Economic Research

Date Written: August 31, 2016

Abstract

We test the existence and extent of capital flows as an offset to monetary policy in Argentina from 1992-2014. After providing an analysis of Argentina’s past and current economic conditions, a theoretical framework of the offset and sterilization mechanisms will be provided. Then, with the use of VAR and IRF analysis, it is shown that a one standard deviation shock to monetary policy (measured by changes in net domestic assets) is offset between 27%-32% by responsive capital flows (measured by changes in net foreign assets). Furthermore, the results indicate that the Argentine government more than sterilizes shocks to capital flows through compensation of expansionary monetary policy.

Keywords: Argentina; foreign exchange market; offset mechanism; sterilization; capital flows

JEL Classification: E52, E58, F31

Suggested Citation

Thomas, Carolyn and Cachanosky, Nicolas, Offsetting and Sterilization Mechanisms in Argentina (1992-2014) (August 31, 2016). 2016. Credit and Capital Markets. Vol. 49, no. 4, pp. 515-534. Available at SSRN: https://ssrn.com/abstract=2832884

Carolyn Thomas

Metropolitan State University of Denver, Department of Economics, Students ( email )

890 Auraria Pkwy
Denver, CO 80204
United States

Nicolas Cachanosky (Contact Author)

Metropolitan State University of Denver ( email )

Student Success Building
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Denver, CO 80217
United States

HOME PAGE: http://www.ncachanosky.edu

American Institute for Economic Research

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