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smagallanes
smagallanes
22.12.2021 • 
Business

As Paul Krugman notes in "Partying Like It’s 1998", foreign currency borrowing makes an emerging market country vulnerable to a devaluation. Krugman writes: "Whatever the shock, the crucial thing is that foreign [currency] debt has made your economy vulnerable to a death spiral." [Krugman’s article is attached separately] Was it a mistake for Argentina to encourage businesses and consumer to borrow in dollars in the 1990’s? As part of your answer, briefly explain both the pros and cons for Argentina of encouraging businesses and households to borrow in dollars.

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