An Alternative View on Inflation in Argentina in the Millennium: The Challenges of the Current Situation

Ramiro Alvarez and Florencia Medici
Additional contact information
Ramiro Alvarez: National Scientific and Technical Research Council (CONICET) and Center for Studies of Political Economy and Development (CEEPYD/UNM), National University of Moreno, Argentina

Economia Internazionale / International Economics, 2024, vol. 77, issue 1, 117-150

Abstract: This article interprets Argentina’s recent inflation process following the Classical-Structuralist approach. In this theoretical framework, the price dynamic is understood as the result of conflict between wage increases and devaluations in a price-taker economy open to trade and financial flows. We argue that inflationary processes in Argentina during the new century, especially in the last decade, can be explained by devaluations triggered by dynamics linked to the external sector, resulting from financial deregulation processes and inflows of external liabilities. In this scenario, conflict inflation manifests through a persistent exchange rate-wage spiral. Thus, national currency devaluations raise profit margins and price levels in a society with strong labor unions, which react by claiming wage increases. High inflation regimes lead to changes in income distribution that are incompatible with habits, history, and labor institutions, resulting in intense distributive conflict under “pendulum” governments that reflect a situation of political stalemate. Moreover, the State’s capability to implement anti-inflationary policies based on an exchange rate anchor depends on the amount of the monetary authority’s foreign currency reserves. The ability to intervene in the foreign exchange market aims to deal with conflicting social groups and external pressures pushing to generate devaluation.

Keywords: Argentina; Distributive Conflict; Inflation; Exchange Rate; Political Stalemate (search for similar items in EconPapers)
JEL-codes: B51 E02 E31 E64 N16 O23 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.iei1946.it/article/pdf/download/1093/a ... he-current-situation Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:ecoint:0965

Access Statistics for this article

Economia Internazionale / International Economics is currently edited by Giovanni Battista Pittaluga

More articles in Economia Internazionale / International Economics from Camera di Commercio Industria Artigianato Agricoltura di Genova Via Garibaldi 4, 16124 Genova, Italy. Contact information at EDIRC.
Bibliographic data for series maintained by Angela Procopio ().