But they were not cost-free: in the absence of using the exchange rate as a shock absorber, the burden of adjustment in the economy under a currency board agreement necessarily falls on wages and prices.
In the case of Argentina, the rigidity of the hard peg came to the forefront in the wake of a series of external shocks in early 1999 – notably the higher cost of financing to emerging markets, the sharp devaluation of the Brazilian real, the rapidly appreciating US dollar, and falling commodity prices.