Despite recent discussions on the possibility of re-issuing former European currencies, few studies have analyzed the impact that regional currencies had on economic activity. The case of Argentina from 2001 to 2003 presents a particular case study to analyze this. Fifteen out of the twenty three provinces issued their own currencies to deal with budget deficits and under the assumption that the increase supply of money would spur the demand of goods and services. At the same time, the country suffered its worst economic crisis, with a surge in unemployment, poverty, a major devaluation of the Peso and the drop of economic activity.
This paper first presents briefly the characteristics of Argentina in those years and introduces the list of provincial currencies that were issued. Then, it analyzes the effect that quasi-currencies had on several employment variables, by comparing the group of provinces that issued local monies with the group that did not. The employment level in the industrial and service sectors is analyzed and similar provinces are compared.
Provinces that issued currencies did not experience a surge neither in total employment nor in specific sectors. Moreover, similar provinces show similar performances or show that the provinces that issued their own currency have a higher rate of destruction of private jobs. Quasi-currencies failed to increase activity and the national government had to pay for their rescue.