, imf staff papers, vol. 50, no. 1, international monetary fund. - levin, a., wieland, v. and williams, j. ( 2003 ). “ the performance of forecast - based monetary policy rules under model uncertainty ”, the american economic review, vol. 93, pp. 622 - 45. - levy yeyati, e. and sturzenegger, f. ( 2005 ). “ classifying exchange rate regimes : deeds vs. words ”, european economic review, vol. 49. august. - lucas, r. ( 1976 ). “ econometric policy evaluation : a critique ”, carnegie - rochester conference series on public policy, 1. - rajan, r. and subramanian, a. ( 2006 ). “ aid, dutch disease, and manufacturing growth ”, mimeo, imf. - sargent, t. ( 1993 ). bounded rationality in macroeconomics, oxford : clarendon press. - sargent, t. ( 2007 ). “ evolution and intelligent design ”, eleventh annual conference, santiago, chile. - svensson, l. ( 1999 ). “ how should monetary policy be conducted in an era of price stability, ” in new challenges for monetary policy, federal reserve bank of kansas city, 195 - 259. - walsh, c. ( 2003 ). “ implications of a changing economic structure for the strategy of monetary policy ”, in monetary policy and uncertainty : adapting to a changing economy, jackson hole symposium, federal reserve bank of kansas city, pp. 297 - 348.

is important to take the fiscal, financial and external conditions into account. an autistic monetary regime that dodges these issues, at the risk of becoming an additional source of uncertainty, would be of no use. in sargent ’ s words, there is no robust monetary regime for an inconsistent fiscal policy. our twentieth century history says a lot about the close link between the lack of fiscal solvency and inflation. even though in recent years the restriction has eased thanks to the surplus public accounts, the literature on fiscal dominance problems is not limited to the current period. it is well known that tax revenue structure depends on the current relative price structure – hence the need to address the question under a general equilibrium approach. similarly, doubts as to the financial system ’ s solvency or external sustainability can also limit monetary policy room for maneuver. as to external solvency, it would be wrong to tailor exchange rate policy to temporary trends : part of the current pressure for the appreciation of emerging currencies relates to commodity prices ( through the current account ) and the investors ’ risk appetite ( through the capital account ), which may clearly be temporary instead of permanent forces. rajan and subramanian ( 2006 ) have highlighted the difference in treatment according to whether the trend is caused by permanent or temporary factors. in a financial world characterized by capital flow volatility, a massive amount of capital may lead to some kind of “ dutch disease, ” with unsustainable paths and high real variable volatility. this kind of problem might be often the case in small economies, where the local financial market may be negligible as compared to international flows, and where it is very difficult to know the equilibrium level of real variables. thus, temporary forces that work from the market side may lead to nominal exchange rate overshooting ( whether up or down ). far from adjusting towards the long - term equilibrium level, this may cause excessive volatility and distort relative price signals for savings and consumption. all in all, it is clear that uncertainty faced by an economy such as argentina ’ s is not limited to the notion of risk. while in the latter case the stochastic process to generate data is known, in the former the true model of macroeconomic operation is unknown. a frequency distribution bar chart of the argentine gdp in the last 25 years would show that it is equally probable to grow or fall at a 10 percent rate, so there are empirical problems to project the trend of fundamental variables.