A Comparative Perspective
Edited by Werner Baer and David Fleischer
Chapter 19: Inflation and Macroeconomic Policies in Post-convertibility Argentina
Daniel Heymann, Adrián Ramos and Horacio Aguirre 19.1 INTRODUCTION The history of inflation in Argentina over the past decades covers a very wide range of situations, from deflation to hyperinflation, reflecting large swings in economic policies, private behaviors and the external environment. Between 1945 and 1974, the annual (CPI) inflation rate was lower than 10 per cent only in 3 years, but remained below 100 per cent (with a single exception in 1959). The macroeconomic and political crisis in 1975–76 defined a transition to a period of very high and variable inflation which lasted 15 years, with inflation rates well over 100 per cent (except in 2 years), and dramatic episodes of hyperinflation in 1989 and 1990. The public perception of the large social costs of such instability supported the introduction in 1991 of a currency board system with a hard peg to the dollar, and tight constraints on monetary policies. After a substantial price drift, the inflation rate converged to international levels, or even less. But the ‘convertibility regime’ eventually proved unsustainable, and collapsed in 2001 in a deep crisis of historic proportions, which included the declaration of default on public debt and massive redefinitions of private financial contracts. However, even in the context of a disturbance with very severe social and political consequences, as well as economic effects which included a sharp depreciation, the response of domestic prices was quite moderate and a spike in the inflation rate did not become entrenched. Thus, contrary to many...
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