Why Did Inflation Targeting Fail in Argentina?
48 Pages Posted: 31 May 2019
Date Written: May 8, 2019
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: Suggested Citation