Argentina 2002-2008: economic cycle, inflation and growth

Abstract

The features of the fast growth process undertaken since 2002 in Argentina seem to lead to the repetition of an already habitual cycle in national history. In the past, such cycle supposed an alternation of regimes of economic policy that couldn’t achieve a stability because they did not overcome the two main constraint to growth: the social constraint (or the little inclusion of orthodox regimes), and the foreign exchange constraint, typical of ‘national-popular’ regimes (or populism), setting up a pendulum like path that signed most of the last half of the 20th century. The recent experience seems to insinuate that this stop and go cycles return to the center of the scene and with them we see the reappearance confl icts that are inherent to them (tensions and distributive inconsistencies, infl ations, etc.). In order to analyze this process, we adopt an approach where the long run growth is explained by effective demand in a balance of payments costrained framework. In this context, we describe the forces that leads to the stopping of the supermultiplier (i.e. the combined multiplier and accelerator effects) to come from the way of resolving the distributive confl ict and/or the severity that the foreign constraint acquires in each conjuncture, which shapes domestic economic cycles and offers a more fruitful fi eld for a more fully comprehension of the chronic infl ation phenomena that periodically affects Argentina.