Convertibilidad, capitales volátiles y estabilización. El papel de las finanzas del gobierno

Abstract

This paper examines the potential effects of volatile international capital flows
on a small, commercially and financially open economy under a currency board regime, as
is currently the case in Argentine. ln the face of shocks, like those associated with changes in
the magnitude and direction of capital flows, the convertibility regime generates pro-cyclical
reactions, which pose important problems for the stabilization of real and financial variables.
In particular, the paper focuses on the stabilizing role of decisions concerning public debt
management and, in general, the administration of the Treasury’s and Central Bank’s financial portfolios (assets and liabilities, including foreign exchange reserves). The paper briefly reviews the main analytical approaches to the public sector’s financial portfolio management and, within that framework, makes a stylized examination of the distinctive characteristics of the Argentine case.

JEL Classification: F41; H63; E61.