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Economic Recovery from the Argentine Great Depression: Institutions, Expectations, and the Change of Macroeconomic Regime

42 Pages Posted: 8 Aug 2012  

Gerardo della Paolera

American University of Paris

Alan M. Taylor

University of California, Davis - Department of Economics; University of Virginia - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: April 2000

Abstract

This work explores how Argentina overcame the Great Depression and asks whether active macroeconomic interventions made any contribution to the recovery. In particular, we study Argentine macroeconomic policy as it deviated from gold-standard orthodoxy after the final suspension of convertibility in 1929. As elsewhere, fiscal policy in Argentina was conservative, and had little power to smooth output. Monetary policy became heterodox after 1929. The first and most important stage of institutional change took place with the switch from a metallic monetary regime to a fiduciary regime in 1931; the Caja de ConversiĀ¢n (Conversion Office, a currency board) began rediscounting as a means to sterilize gold outflows and avoid deflationary pressures, thus breaking from orthodox game. and were not enough to fully offset the incipient monetary contractions: the recovery derived from changes in beliefs and expectations surrounding the shift in the monetary and exchange-rate regime, and the delinking of gold flows and the money base. Agents perceived a new regime, as shown by the path of consumption, investment, and estimated ex ante real interest rates: the predated a later, and supposedly more significant, stage of institutional reform, namely the creation of the central bank in 1935. Still, the extent of intervention was weak, and insufficient to fully offset external shocks to prices and money. Argentine macropolicy was heterodox in terms of the change of regime, but still conservative in terms of the tentative scope of the measures taken.

Suggested Citation

della Paolera, Gerardo and Taylor, Alan M., Economic Recovery from the Argentine Great Depression: Institutions, Expectations, and the Change of Macroeconomic Regime (April 2000). NBER Working Paper No. w6767. Available at SSRN: https://ssrn.com/abstract=138227

Gerardo Della Paolera (Contact Author)

American University of Paris ( email )

31 Avenue Bosquet
Paris, 75007
France

Alan M. Taylor

University of California, Davis - Department of Economics ( email )

One Shields Drive
Davis, CA 95616-8578
United States
530-752-1572 (Phone)
530-752-9382 (Fax)

HOME PAGE: http://www.econ.ucdavis.edu/faculty/amtaylor/

University of Virginia - Department of Economics ( email )

P.O. Box 400182
Charlottesville, VA 22904-4182
United States
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(434)-982-2904 (Fax)

HOME PAGE: http://people.virginia.edu/~amt7u

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

HOME PAGE: http://nber.org

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

HOME PAGE: http://cepr.org

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