The FX assignment will be based on the Argentina Devaluation Raises Fears of a Crisis article. When we apply the key drivers of FX what would be the impact on the following drivers for Argentina:
• Current Account Balance
• GDP growth
• Fiscal Balance
• Impact on Foreign Exchange reserves and gold
• Inflation expectations
• Interest Rates
Suppose Argentina functioned under a system of exchange rates pegged around official parities, provide a brief explanation why each of the following is a possible remedy for a country facing a balance of payments deficit?
a. Using its international reserves of gold and convertible currencies
b. Adopting tariffs on imports and introducing capital controls,
c. Letting its exchange rate drop within the allowable band around the central parity
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