SMP: In Argentina, Inflation Is Still a Monetary Phenomenon

Peronism is returning in Argentina. On December 10, Alberto Fernández assumed the presidency of Argentina. The office of vice president is now held by none other than Cristina Fernández de Kirchner, who served as president for two consecutive terms between 2007 and 2015. It was under her tenure that Argentina entered a period of stagflation (stagnation with inflation). 

After four years with Mauricio Macri at the helm and a failed implementation of inflation targeting, Argentina’s inflation rate is once again reaching its highest level since the hyperinflation of the late 1980s. If one takes Fernandez’s pronouncements seriously, the prospects of seeing disinflation in the short and medium terms are slim.

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Un pensamiento en “SMP: In Argentina, Inflation Is Still a Monetary Phenomenon

  1. Inflation always and everywhere is a monetary phenomenon. The recent macroeconomics with inflation targets and Taylor rule say that it is a real phenomenon that depends on the product gap and expectations, but they hide the money through Taylor’s rule with the management of the reference interest rate , making changes in the amount of money to move this interest rate. Then they have turned monetary policy into discretionary, although they say it is restricted. The Structuralists and the Neo Structuralists also did not believe in money as a driver of inflation, their proposals to stabilize always failed. The funny thing is that in Peru, the Central Reserve Bank uses the Quantitative Equation, in accordance with the reference rate to match both sides of the equation. See the last chart of the Samanal Report of the Central Bank of Peru. Given this monetary policy, one could say that we simply will not have inflation, and this rate is the second lowest in Latin America, before it is from Ecuador.

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