IDEAS home Printed from https://ideas.repec.org/a/bla/ecnote/v47y2018i1p125-144.html
   My bibliography  Save this article

Exchange Rate Depreciation, Wage Resistance and Inflation in Argentina (1882–2009)

Author

Listed:
  • Matias Vernengo
  • Nathan Perry

Abstract

This paper describes some of the main alternatives to the dominant neoclassical theories of inflation, according to which inflation is always a monetary phenomenon. The model develops a cost†push approach, in which rising costs are mainly related to external constraints. Not only is inflation seen as resulting from balance of payments crises, but fiscal crises also are the result of the initial balance of payments crises within this framework. Fiscal deficits, and all other excess demand pressures, are absent, so that high levels of inflation are compatible with an economy that is below full employment, and stabilization is independent of fiscal adjustments. The model is then tested using a Vector Autoregression model and finds strong evidence for alternative theories of inflation over the monetarist theory. The empirical section tests both the long period (1882–2009) and the modern period (1990–2007) analyzing the impact of wages, the nominal exchange rate, the output gap and the monetary base on inflation. The results show that the exchange rate (external constraints) has been the primary cause of inflation. Wages are a causal factor in both models, and the monetary base and output gap show low causality in the long period, and ambiguous results for the modern period.

Suggested Citation

  • Matias Vernengo & Nathan Perry, 2018. "Exchange Rate Depreciation, Wage Resistance and Inflation in Argentina (1882–2009)," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 47(1), pages 125-144, February.
    • Handle: RePEc:bla:ecnote:v:47:y:2018:i:1:p:125-144
    DOI: 10.1111/ecno.12098
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/ecno.12098
    Download Restriction: no
    File URL: https://libkey.io/10.1111/ecno.12098?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Schwert, G William, 2002. "Tests for Unit Roots: A Monte Carlo Investigation," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 5-17, January.
    2. Pierangelo Garegnani, 2024. "Value and Distribution in the Classical Economists and Marx," Springer Studies in the History of Economic Thought, in: Roberto Ciccone (ed.), Capital Theory, the Surplus Approach, and Effective Demand, pages 305-340, Springer.
    3. Bruno, Michael, 1993. "Crisis, Stabilization, and Economic Reform: Therapy by Consensus," OUP Catalogue, Oxford University Press, number 9780198286639.
    4. Canavese, Alfredo J., 1982. "The structuralist explanation in the theory of inflation," World Development, Elsevier, vol. 10(7), pages 523-529, July.
    5. Wilkinson, Frank, 2000. "Inflation and Employment: Is There a Third Way?," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 24(6), pages 643-670, November.
    6. Olivera, Julio H G, 1970. "On Passive Money," Journal of Political Economy, University of Chicago Press, vol. 78(4), pages 805-814, Part II J.
    7. Paul Davidson, 1990. "A Post Keynesian Positive Contribution to “Theory”," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 13(2), pages 298-303, December.
    8. de Carvalho, Fernando J Cardim, 1993. "Strato-inflation and High Inflation: The Brazilian Experience," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 17(1), pages 63-78, March.
    9. Rowthorn, R E, 1977. "Conflict, Inflation and Money," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 1(3), pages 215-239, September.
    10. Cardoso, Eliana A., 1981. "Food supply and inflation," Journal of Development Economics, Elsevier, vol. 8(3), pages 269-284, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Eli Direye & Tarron Khemraj, 2022. "Central bank securities and foreign exchange market intervention in a developing economy," Review of Development Economics, Wiley Blackwell, vol. 26(1), pages 280-297, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Matias Vernengo, 2003. "Balance of Payments Constraint and Inflation," Working Paper Series, Department of Economics, University of Utah 2003_06, University of Utah, Department of Economics.
    2. Matias Vernengo, 2005. "Money and Inflation: A Taxonomy," Working Paper Series, Department of Economics, University of Utah 2005_14, University of Utah, Department of Economics.
    3. Akhand Akhtar Hossain, 2009. "Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 12777.
    4. Gerchunoff, Pablo & Rapetti, Martín, 2016. "La economía argentina y su conflicto distributivo estructural (1930-2015)," El Trimestre Económico, Fondo de Cultura Económica, vol. 0(330), pages .225-272, abril-jun.
    5. Daniel G. Arce M., 1996. "Social Norms, Inflation And Stabilization," Rationality and Society, , vol. 8(3), pages 277-294, August.
    6. André Roncaglia, 2016. "Structural Change, De-Industrialization And Inflation Inertia In Brazil," Anais do XLII Encontro Nacional de Economia [Proceedings of the 42nd Brazilian Economics Meeting] 077, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    7. Peter Docherty, 2008. "Money and Monetary Policy in a Kaldor-Pasinetti-Sraffa-Keynes Framework," Working Paper Series 153, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    8. Eduardo F. Bastian & Mark Setterfield, 2015. "A simple analytical model of the adverse real effects of inflation," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 38(4), pages 637-665, November.
    9. Oatlhotse Madito & Nicholas M. Odhiambo, 2018. "The Main Determinants Of Inflation In South Africa: An Empirical Investigation," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 9(2).
    10. Dvoskin, Ariel & Torchinsky Landau, Matías, 2023. "Income distribution and economic cycles in an open-economy supermultiplier model," Structural Change and Economic Dynamics, Elsevier, vol. 64(C), pages 273-291.
    11. Jill Rubery & Brendan Burchell & Simon Deakin & Suzanne J Konzelmann, 2022. "A Tribute to Frank Wilkinson," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 46(3), pages 429-445.
    12. André Roncaglia de Carvalho, 2014. "Structural change, de-industrialization and inflation inertia in Brazil," Working Papers, Department of Economics 2014_29, University of São Paulo (FEA-USP).
    13. Mauro Boianovsky, 2011. "Furtado and the structuralist-monetarist debate on economic stabilization in Latin America," Anais do XXXVII Encontro Nacional de Economia [Proceedings of the 37th Brazilian Economics Meeting] 004, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    14. Nicolás Cachanosky & Emilio Ocampo, 2023. "Is inflation caused by conflict?," CEMA Working Papers: Serie Documentos de Trabajo. 852, Universidad del CEMA.
    15. Santos, João & Domingos, Tiago & Sousa, Tânia & St. Aubyn, Miguel, 2016. "Does a small cost share reflect a negligible role for energy in economic production? Testing for aggregate production functions including capital, labor, and useful exergy through a cointegration-base," MPRA Paper 70850, University Library of Munich, Germany.
    16. James Nguyen & Wei-Xuan Li & Clara Chia-Sheng Chen, 2022. "Mean Reversions in Major Developed Stock Markets: Recent Evidence from Unit Root, Spectral and Abnormal Return Studies," JRFM, MDPI, vol. 15(4), pages 1-20, April.
    17. Gilberto Tadeu Lima, 2000. "Market concentration and technological innovation in a dynamic model of growth and distribution," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 53(215), pages 447-475.
    18. Bierens, H.J. & Broersma, L., 1991. "The relation between unemployment and interest rate : some international evidence," Serie Research Memoranda 0112, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    19. GUO-FITOUSSI, Liang, 2013. "A Comparison of the Finite Sample Properties of Selection Rules of Factor Numbers in Large Datasets," MPRA Paper 50005, University Library of Munich, Germany.
    20. Rowthorn, Bob & Glyn, Andrew, 1990. "The diversity of unemployment experience since 1973," Structural Change and Economic Dynamics, Elsevier, vol. 1(1), pages 57-89, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ecnote:v:47:y:2018:i:1:p:125-144. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0391-5026 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.