Argentina's Experience: Any Lessons for Turkey?, Spring 2002

The purpose of this note is to present a recap of the Argentina and Turkish experiences with stabilization over the years in order to help shift the focus of comparison between the two countries within domestic circles towards a more academic discussion. This said, a full-fledged comparison of the two countries’ experiences and definite lessons for Turkey are beyond the scope of this note. Rather, the note has the more humble objective of providing a spark to ignite further and more complete analyses of the issues as they relate to drawing lessons for Turkey from Argentina’s long list of stabilization plans. There seem to be significant similarities between Turkey and Argentina regarding the dynamics of inflation and how it has changed over time. There are differences as well, but still Turkey can benefit from Argentina’s past experience going forward. A critical lesson to be learned is that once fundamental weaknesses related to the fiscal regime and the banking sector are corrected; the choice of the exchange rate regime is likely to matter less. Nevertheless, progress in disinflation is likely to be slow with Turkey’s floating exchange rate and inflation targeting framework, unless the government can effectively coordinate wage and price increases in the private sector.
 

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