Argentina Inflation

Argentina has suffered from many years of unstable political and economic situation due to the frequent change of governments between completely opposite ideologies. The government faced several economic crisises which enlarged their debts Since 2007 Argentina's government has published inflation figures that almost nobody believes. The Argentinean government lost the confidence of investors and more capital flew away from the country. In 2001 the Argentinean people started to withdraw their money from the banks, converted it into dollar and sent it abroad. After few months the currency was allowed to flow more or less freely causing high inflation rates. The situation became worse during 2002 caused by high inflation and high unemployment rates (nearly 25 %). At the end of 2002 the situation could be normalized to a certain extend and new elections were hold

The EU cooperation envisaged for the period 2007-2013 rests on two pillars. It supports Argentina's social and economic recovery with an eye to social cohesion and builds the capacity of players in the public and academic sectors to contribute to improved governance, social cohesion and sustainable development.

Central Bank may apply some risk management that was critical for the successful performance. First is the convergence between supply and demand in the monetary market defined through yearly public commitments with quarterly targets. Secondly, the managed floating exchange rate regime. The generation of liquidity buffers (both in domestic and foreign currency), and lastly, the regulation and supervision of the financial system to reduce its risk exposure. Due to this approach, when the crisis started, the system was well prepared to face the successive instability episodes on the one hand and, on the other, the monetary authority could respond adequately to the turmoil through operations in the exchange rate market to contain the depreciating pressures and through liquidity provision in local currency for the financial institutions.

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