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Economic Recovery from the Argentine Great Depression: Institutions, Expectations, and the Change of Macroeconomic Regime

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  • Gerardo della Paolera
  • Alan M. Taylor

Abstract

This work explores how Argentina overcame the Great Depression and asks whether active macroeconomic interventions made any contribution to the recovery. In particular, we study Argentine macroeconomic policy as it deviated from gold-standard orthodoxy after the final suspension of convertibility in 1929. As elsewhere, fiscal policy in Argentina was conservative, and had little power to smooth output. Monetary policy became heterodox after 1929. The first and most important stage of institutional change took place with the switch from a metallic monetary regime to a fiduciary regime in 1931; the Caja de Conversi¢n (Conversion Office, a currency board) began rediscounting as a means to sterilize gold outflows and avoid deflationary pressures, thus breaking from orthodox game. and were not enough to fully offset the incipient monetary contractions: the recovery derived from changes in beliefs and expectations surrounding the shift in the monetary and exchange-rate regime, and the delinking of gold flows and the money base. Agents perceived a new regime, as shown by the path of consumption, investment, and estimated ex ante real interest rates: the predated a later, and supposedly more significant, stage of institutional reform, namely the creation of the central bank in 1935. Still, the extent of intervention was weak, and insufficient to fully offset external shocks to prices and money. Argentine macropolicy was heterodox in terms of the change of regime, but still conservative in terms of the tentative scope of the measures taken.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6767.

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Date of creation: Apr 2000
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Publication status: published as Journal of Economic History, vol. 59, no. 3 (September 1999): 567-599.
Handle: RePEc:nbr:nberwo:6767

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  1. Michael D. Bordo, 1995. "The Gold Standard as a `Good Housekeeping Seal of Approval'," NBER Working Papers 5340, National Bureau of Economic Research, Inc.
  2. Thomas J. Sargent, 1982. "The Ends of Four Big Inflations," NBER Chapters, National Bureau of Economic Research, Inc, in: Inflation: Causes and Effects, pages 41-98 National Bureau of Economic Research, Inc.
  3. Ben Bernanke & Harold James, 1990. "The Gold Standard, Deflation, and Financial Crisis in the Great Depression: An International Comparison," NBER Working Papers 3488, National Bureau of Economic Research, Inc.
  4. Romer, Christina D., 1992. "What Ended the Great Depression?," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 52(04), pages 757-784, December.
  5. Barry Eichengreen., 1991. "The Origins and Nature of the Great Slump, Revisited," Economics Working Papers, University of California at Berkeley 91-156, University of California at Berkeley.
  6. Barry Eichengreen & Peter Temin, 1997. "The Gold Standard and the Great Depression," NBER Working Papers 6060, National Bureau of Economic Research, Inc.
  7. Gerardo della Paolera & Alan M. Taylor, 1997. "Finance and Development in an Emerging Market: Argentina and the Interwar Period," NBER Working Papers 6236, National Bureau of Economic Research, Inc.
  8. Temin, Peter & Wigmore, Barrie A., 1990. "The end of one big deflation," Explorations in Economic History, Elsevier, Elsevier, vol. 27(4), pages 483-502, October.
  9. Peter Temin, 1991. "Lessons from the Great Depression," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262700441, December.
  10. repec:cup:etheor:v:11:y:1995:i:5:p:984-1014 is not listed on IDEAS
  11. Horvath, Michael T.K. & Watson, Mark W., 1995. "Testing for Cointegration When Some of the Cointegrating Vectors are Prespecified," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 11(05), pages 984-1014, October.
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  1. Buscando un Premio Nobel colectivo
    by Lucas Llach in La ciencia maldita on 2010-11-03 00:55:43
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Cited by:
  1. Cha, Myung Soo, 2000. "Did Korekiyo Takahashi Rescue Japan from the Great Depression?," Discussion Paper Series, Institute of Economic Research, Hitotsubashi University a395, Institute of Economic Research, Hitotsubashi University.
  2. Michael D. Bordo & Harold James, 2008. "A Long Term Perspective on the Euro," NBER Working Papers 13815, National Bureau of Economic Research, Inc.
  3. Michael D. Bordo & Carlos A. Vegh, 1998. "What If Alexander Hamilton Had Been Argentinean? A Comparison of the Early Monetary Experiences of Argentina and the United States," NBER Working Papers 6862, National Bureau of Economic Research, Inc.
  4. Solimano Andrés, 2004. "Globalization, history and international migration : a view from Latin America," ILO Working Papers, International Labour Organization 373388, International Labour Organization.
  5. Leandro Prados de la Escosura & Isabel Sanz Villarroya, 2006. "Contract Enforcement and Argentina’s Long-Run Decline," Working Papers in Economic History wp06-06, Universidad Carlos III, Departamento de Historia Económica e Instituciones.
  6. Haubrich, Joseph G. & Ritter, Joseph A., 2004. "Committing and reneging: A dynamic model of policy regimes," International Review of Economics & Finance, Elsevier, Elsevier, vol. 13(1), pages 1-18.
  7. Alston, Lee J. & Gallo, Andrés A., 2010. "Electoral fraud, the rise of Peron and demise of checks and balances in Argentina," Explorations in Economic History, Elsevier, Elsevier, vol. 47(2), pages 179-197, April.
  8. Guisan, M.Carmen & Martinez, C., 2003. "Education, Industrial Development and Foreign Trade in Argentina: Econometric Models and International Comparisons," Economic Development, University of Santiago de Compostela. Faculty of Economics and Business. Econometrics. 67, University of Santiago de Compostela. Faculty of Economics and Business. Econometrics..
  9. Isabel Sanz Villarroya, 2007. "Los resultados macroeconómicos y la posición relativa de la economía argentina: 1875-2000," Working Papers in Economic History wp07-04, Universidad Carlos III, Departamento de Historia Económica e Instituciones.
  10. Leandro Prados de la Escosura & Isabel Sanz-Villarroya, 2004. "Institutional Instability And Growth In Argentina: A Long-Run View," Working Papers in Economic History wh046705, Universidad Carlos III, Departamento de Historia Económica e Instituciones.
  11. Michael D. Bordo & Agnieszka Markiewicz & Lars Jonung, 2011. "A Fiscal Union for the Euro: Some Lessons from History," NBER Working Papers 17380, National Bureau of Economic Research, Inc.
  12. Barry Eichengreen, 2002. "Still Fettered After All These Years," NBER Working Papers 9276, National Bureau of Economic Research, Inc.

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