Handout 5b - Handout 5b Fixed Exchange Rates and...

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Handout 5b – Fixed Exchange Rates and Speculation Spring 2007 Page 1 of 2 From April 1991 to December 2001, Argentina maintained a currency board under which the Argentine peso was fixed or pegged one for one to the U.S. dollar. Beginning in late 2001, the fixed exchange rate system began to crumble as the Argentine government was running massive budget deficits and as result the peso came under attack by currency speculators. The following handout has you examine the causes and consequences of the Argentina currency crisis of 2001-02. The Supply and Demand for Argentine Pesos in the Dollar-Peso Market 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 Exchange rate ($ / peso) Quantity of pesos traded (millions) Supply of pesos Demand for pesos 1. What is the market equilibrium value of the dollar-peso exchange rate in the graph above? 2.
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This note was uploaded on 04/18/2008 for the course ECON 100 taught by Professor Kasilwal during the Spring '07 term at CSU Long Beach.

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Handout 5b - Handout 5b Fixed Exchange Rates and...

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