Internal Versus External Convertibility and Emerging-Market Crises: Lessons From Argentine History
Author(s)
DellaPaolera, Gerardo; Taylor, Alan M.
Abstract
Analyzes Argentina’s early monetary history, including the Baring Crisis of 1890-91 and the larger crisis of 1913-14, to show just how fragile the banking system was. (The Baring Crisis resulted from the failure of bonds issued in Argentina by the British firm Baring Brothers.) The fragility of Argentina’s banking system was confirmed in the Great Depression when the suspension of gold convertibility in 1929 found banks awash with bad assets. The insolvency of the state bank was followed in 1935 by the demise of the currency board and the creation of a central bank, which bailed out the banking system at a massive social cost. The history demonstrates the tension between internal and external convertibility and suggests lessons for the design of contemporary banking and monetary systems.
