Of Greek Curses and Stabilisation Plans in Arhentina

Soon after leaving Convertibility, Argentina started to experience a long period of chronic inflation characterised by inflation rates resilient to decline, despite policymakers’ attempt to restoring stability. Particularly during the sub-period (2010-2023), stabilising policies either based on control of monetary aggregates, inflation targeting, or including the monetary authority’s rates of interest did not succeed in checking inflation. Two reasons mainly accounted for stabilisation policies failing to achieve results; first, fiscal policies not aligned with stabilisation goals, and second, an exchange anchor based on a not credible crawling-peg mechanism, plus restrictions upon exchange market operations, causing an informal exchange rate to appear and forcing devaluations of the national currency (individuals’ self-fulfilled prophecies). In contrast, the government elected for the period (2023-2027), resorted to a complete different stabilising policy approach privileging an orderly fiscal policy based on the control of the monetary base, the reduction of public spending and the elimination of fiscal deficits which soon achieved gradual contractions of inflation rates of single digits. However, policy makers face now new challenges as high interest rates used to absorb liquidity and to ease pressure upon dollar favour recession impacting in turn upon the levels of economic activity, investment and employment.