Stabilization policies in Argentina: an analysis from the perspective of inflation uncertainty
In understanding the Argentinean inflationary experience, one can identify the floowing economic causes: the structure of the economy, the fiscal deficit and the specific characteristics of the implemented stabilization programs. From 1948 until 2005 all administrations had to pursue at least one stabilization program. This paper identifies the timinig of the implemented programs, the main instruments used to achieve price stability and the consequences these programs had on the evolution of inflation uncertainty. The objective is to test wether inflation uncertainty rose as the inconsistencies of the stabilization programs became apparent and, thus, the programs came to an end. The estimation of the unobservable inflation uncertainty is based on running Markov-Switching Models. This class of models can identify heterokedastic behaviors as well as changes of the level of inflation for different states of the economy. In this paper the monthly inflation level defines the states. The initial sucess of the different programs tended to disappear rapidly, therefore reducing the confidence of economic agents.
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