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

  • Paolera, Gerardo Della
  • Taylor, Alan M.

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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Article provided by Cambridge University Press in its journal The Journal of Economic History.

Volume (Year): 59 (1999)
Issue (Month): 03 (September)
Pages: 567-599

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Handle: RePEc:cup:jechis:v:59:y:1999:i:03:p:567-599_02
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  1. Romer, Christina D., 1992. "What Ended the Great Depression?," The Journal of Economic History, Cambridge University Press, vol. 52(04), pages 757-784, December.
  2. 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.
  3. Eichengreen, Barry, 1991. "The Origins and Nature of the Great Slump, Revisited," Department of Economics, Working Paper Series qt55s856nv, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  4. Thomas J. Sargent, 1981. "The ends of four big inflations," Working Papers 158, Federal Reserve Bank of Minneapolis.
  5. Barry Eichengreen & Peter Temin, 1997. "The Gold Standard and the Great Depression," NBER Working Papers 6060, National Bureau of Economic Research, Inc.
  6. 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.
  7. Bordo, Michael D. & Rockoff, Hugh, 1996. "The Gold Standard as a “Good Housekeeping Seal of Approval”," The Journal of Economic History, Cambridge University Press, vol. 56(02), pages 389-428, June.
  8. Temin, Peter & Wigmore, Barrie A., 1990. "The end of one big deflation," Explorations in Economic History, Elsevier, vol. 27(4), pages 483-502, October.
  9. repec:cup:etheor:v:11:y:1995:i:5:p:984-1014 is not listed on IDEAS
  10. Horvath, Michael T.K. & Watson, Mark W., 1995. "Testing for Cointegration When Some of the Cointegrating Vectors are Prespecified," Econometric Theory, Cambridge University Press, vol. 11(05), pages 984-1014, October.
  11. Peter Temin, 1991. "Lessons from the Great Depression," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262700441, June.
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