Why Did Inflation Targeting Fail in Argentina?

48 Pages Posted: 31 May 2019 Last revised: 29 Dec 2021

See all articles by Nicolas Cachanosky

Nicolas Cachanosky

Metropolitan State University of Denver; American Institute for Economic Research; UCEMA Friedman-Hayek Center for the Study of a Free Society

Federico Julian Ferrelli Mazza

Instituto Universitario Escuela Superior de Economía y Administración de Empresas (ESEADE)

Date Written: May 8, 2019

Abstract

Argentina’s experience with inflation targeting lasted only 26 months. In this paper, we study the reason why this regime failed in Argentina and the economic context of its implementation. We find that the main reason was an internal inconsistency in how inflation targeting was implemented, and that said inconsistency was accelerated by a negative credibility shock in December 2017. While other events, such as external shocks, also played a role, they are not enough to explain the shortcomings of the inflation targeting experience in Argentina.

Keywords: Argentina, inflation targeting, central bank credibility, expectations

JEL Classification: E31, E52, E58

Suggested Citation

Cachanosky, Nicolas and Ferrelli Mazza, Federico Julian, Why Did Inflation Targeting Fail in Argentina? (May 8, 2019). AIER Sound Money Project Working Paper No. 2019-14, Quarterly Review of Economics and Finance, Vol. 80 (May), pp. 102-116, Available at SSRN: https://ssrn.com/abstract=3384731 or http://dx.doi.org/10.2139/ssrn.3384731

Nicolas Cachanosky (Contact Author)

Metropolitan State University of Denver ( email )

Student Success Building
890 Auraria Pkwy #310
Denver, CO 80217
United States

HOME PAGE: http://www.ncachanosky.edu

American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

UCEMA Friedman-Hayek Center for the Study of a Free Society ( email )

Buenos Aires
Argentina

Federico Julian Ferrelli Mazza

Instituto Universitario Escuela Superior de Economía y Administración de Empresas (ESEADE) ( email )

Uriarte 2472
Buenos Aires, 1425
Argentina

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