Stabilization in post‐socialist countries: Lessons from exchange rate based stabilization in Argentina

Notes that macro‐economic policy faces the same challenges in both developing and post‐socialist economies: to reduce inflation while achieving or maintaining stable economic growth. Moreover, there are developing countries like Argentina which succeeded in overcoming a type of institutional chaos which comes quite close to what is to be observed in post‐socialist countries. By looking at the theoretical concept and by its implementation in Argentina, examines the main advantages and flaws of an exchange rate anchor. Shows that this is a high risk strategy for post‐socialist countries which needs radical complementary reforms in order to be effective and to minimize risks. Suggests that credibility cannot be imported.