Sunday, September 23, 2007

Speaking of Argentina

Hat tip to Blue Owl over at the LATOC Forum for letting me know about this article on the situation in Argentina, post-collapse and devaluation. A long article, but well worth your time. Print it off and read it at work and your boss will think you are being productive. You will be, but in a way he or she won't imagine until it is too late:

Lessons From Argentina's Economic Collapse

And, for you quants out there, here is a very intersting paper on how the Argentine stock market actually boomed during the collapse - in response to the currency controls and bank freezes. There are a lot of lessons to learn from our friends down south.

The price of inconvertible deposits: the stock market boom during the Argentine crisis
by Eduardo Levy Yeyatia, Sergio L. Schmuklerb, Neeltje Van Horenb
The Argentine crisis witnessed, among other things, a deposit run, the suspension of deposit convertibility, and a ‘‘boom’’ in the stock market. We argue that this boom reflects the cost that depositors were willing to incur to get their money out of the banking system, in light of the impending risks. This boom was generalized to all stocks and more pronounced in liquid stocks. Furthermore, the boom was a symptom that deposits were effectively restricted and that investors were not able to circumvent capital controls.

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