Argentina's 2001 currency crisis illustrates that:

Question

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Argentina's 2001 currency crisis showed that a peg cannot withstand major domestic default and banking crises. The peg, which tied the Argentine peso to the U.S. dollar, collapsed under the weight of a decade-long recession, massive government debt, and a banking system that was on the verge of collapse. This led to a sharp devaluation of the peso, a run on the banks, and widespread economic and social turmoil. As such, the crisis demonstrated the limitations of a fixed exchange rate system and the need for flexible exchange rates and other policy tools to address economic shocks and crises.

Argentina's 2001 Currency Crisis Illustrates That