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

Author

Listed:
  • Alvarez, Ramiro

    (National Scientific and Technical Research Council (CONICET) and Center for Studies of Political Economy and Development (CEEPYD/UNM), National University of Moreno, Argentina)

  • Médici, Florencia

    (National Scientific and Technical Research Council (CONICET) and Institute of Studies in Science, Technology, Culture and Development (CITECDE), National University of Rio Negro, Argentina)

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.

Suggested Citation

  • Alvarez, Ramiro & Médici, Florencia, 2024. "An Alternative View on Inflation in Argentina in the Millennium: The Challenges of the Current Situation," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 77(1), pages 117-150.
  • Handle: RePEc:ris:ecoint:0965
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    References listed on IDEAS

    as
    1. Roberto Frenkel, 2003. "Globalizacion y Crisis Financieras en America Latina," Brazilian Journal of Political Economy, Center of Political Economy, vol. 23(3), pages 437-455.
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    6. Massimo Pivetti, 2007. "Distribution, Inflation and Policy Analysis," Review of Political Economy, Taylor & Francis Journals, vol. 19(2), pages 243-247.
    7. Antonella Stirati, 2001. "Inflation, Unemployment and Hysteresis: An alternative view," Review of Political Economy, Taylor & Francis Journals, vol. 13(4), pages 427-451.
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    More about this item

    Keywords

    Argentina; Distributive Conflict; Inflation; Exchange Rate; Political Stalemate;
    All these keywords.

    JEL classification:

    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
    • N16 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Latin America; Caribbean
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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