Currency crises mean there is a declining value of the currency of a particular country. It will very negatively impact the country. There are various things that will happen such as unemployment, an increase in current account deficit, high inflation, the balance of payment crises, etc. It also increases the pressure on central banks to pump money supply in the markets to maintain stability in the country.

In the case of Argentine, they have to fight against inflation between 1989 1997. After that, the loss of competitiveness in 1998 2001 due to the outbreak of currency crises in Asia, Russia, and Brazil increases the borrowing costs for emerging markets like Argentine. Furthermore, a major change in Brazils exchange rate policy had a great impact on the Argentine economy, as Brazil was one of the countrys main trading partners. Fiscal mismanagement is also a factor that contributes to the crisis.

An overvalued exchange rate; a generally large current account deficit; rising debt, either consumer, corporate or government debt; flat or failing reserves; erosion of policy credibility and poor regulation. More than that, lots of short-term 'hot money' flows into the financial account which is balancing the current account deficit are the cause of the crisis.

What recommendations would you have given at that time to prevent or lessen the crisis?