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Long-run fiscal dominance in Argentina, 1875–19901

Author

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  • Gadea, María Dolores
  • Sabaté, Marcela
  • Sanz, Isabel

Abstract

For most of the twentieth century, Argentina solved the macroeconomic policy trilemma through domestic monetary sovereignty. This article illustrates how the need to finance deficits was behind Argentine sovereignty. We test the hypothesis of fiscal dominance between 1875 and the approval of the Austral Plan in 1991 and find that deficits drove money creation in the long run. The article also reveals how fiscal dominance, in a scenario of increasing currency substitution, helps to explain the dynamics of Argentine inflation in the second half of the twentieth century.

Suggested Citation

  • Gadea, María Dolores & Sabaté, Marcela & Sanz, Isabel, 2012. "Long-run fiscal dominance in Argentina, 1875–19901," Financial History Review, Cambridge University Press, vol. 19(3), pages 311-335, December.
    • Handle: RePEc:cup:fihrev:v:19:y:2012:i:03:p:311-335_00
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    Cited by:

    1. Sabaté, Marcela & Fillat, Carmen & Escario, Regina, 2019. "Budget deficits and money creation: Exploring their relation before Bretton Woods," Explorations in Economic History, Elsevier, vol. 72(C), pages 38-56.
    2. Donato Masciandaro & Davide Romelli & Stefano Ugolini, 2023. "Fiscal Dominance, Monetary Policy and Exchange Rates: Lessons from Early-Modern Venice," BAFFI CAREFIN Working Papers 23205, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.

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