Argentina Economic Crisis Assignment Help

What Argentina's Peso Crisis Says About Global Financial Fragility

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Argentina has a financial crisis in the form of exchange rate risk as the value of Peso has been depreciated at high rate against the US dollar. The main factors of depreciation in the value of Peso against the international currency are raising interest rate by the US Federal Reserve and poor inflation rate in the USA. Argentina economy has heavy reliance on borrowings from foreigners. Information of increase in the US Federal Reserve interest rate initiates reassessment of global risk and foreigner investors finds Argentina economy high risky and low return so withdrawing their investment. Tightening monetary position in the USA results in increase in the US interest rate and it intensifies financial vulnerabilities in emerging economies including Argentina because of strong interconnection among the various nations at global level (Singh, 2018).

In my opinion, main factor for decrease in the value of Peso against the US Dollar is increase in the US Federal Reserve interest rate, which attracts the foreign investors to make their investment in the US economy by withdrawing the fund from economy of Argentina resulting in drastic depreciation in the value of Peso against the international currency.

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