Distributive Effects of Balance-of-Payments Constraints: A Theoretical and Empirical Analysis of Argentina (2004-2022)

Ariel Dvoskin, German Feldman and María Lorena Garegnani
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Ariel Dvoskin: Central Bank of Argentina and National Scientific and Technical Research Council, Argentina
María Lorena Garegnani: Central Bank of Argentina and University of La Plata, Argentina

Economia Internazionale / International Economics, 2024, vol. 77, issue 2, 233-264

Abstract: The paper studies the distributive effects of the external constraint in Argentina during the 2004-2022 period. We first develop a model inspired by the classical tradition - exogenous distribution - for a small (price taker) open economy with technical and financial dependencies under foreign exchange controls to examine the negative effects of exchange rate depreciations on real wage. Then, we use a Vector Error Correction Model (VECM): a) to show the long-run negative relationship between the real exchange rate and real wages in Argentina during the period under analysis; b) to identify the autonomous - or weakly exogenous - role played by the nominal exchange rate in the determination of income distribution; and, c) to capture the influence that, in the short-run, the financial exchange rate exerts on the official exchange rate.

Keywords: Argentina; External Constraint; Income Distribution; Small Open Economy; Vector Error Correction Model (search for similar items in EconPapers)
JEL-codes: B51 C32 D33 F41 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:ris:ecoint:0970

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