By Gerardo della Paolera, Alan M. Taylor
The "Argentine disappointment"—why Argentina many times didn't in attaining sustained fiscal balance in the course of the 20th century—is a subject matter that has mystified students for many years. In Straining the Anchor, Gerardo della Paolera and Alan M. Taylor offer a number of the lacking hyperlinks that aid clarify this crucial ancient episode. Written chronologically, this ebook follows some of the fluctuations of the Argentine financial system from its postrevolutionary volatility to a interval of unparalleled prosperity to a dramatic decline from which the rustic hasn't ever totally recovered. The authors study extensive the suggestions that Argentina has attempted to enforce similar to the Caja de Conversi?n, the nation's first forex board which preferred a strict gold-standard financial regime, the forerunner of the convertibility plan the country has lately followed. With many nations now using—or heavily contemplating—monetary preparations just like Argentina's, this crucial and persuasive examine maps out one among history's best financial experiments to teach what works and what does not.
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Additional info for Straining at the Anchor: The Argentine Currency Board and the Search for Macroeconomic Stability, 1880-1935 (National Bureau of Economic Research Series on Long-Term Factors in Economic Dev)
Example text
10 Straining at the Anchor interwar period, it was still the case, in the long run, that they recovered and prospered more. Many comparison countries did not wait so long to grow rich in the late nineteenth century, and none has since seen its economy fizzle out. Accordingly, we must seek some peculiarly Argentinean characteristics that mark the period 1880-1913 as particularly auspicious for economic growth, focusing on factors that have been conspicuously absent before or since. It is our thesis that such factors-explicitly, shifts in economic policies directly under the control of the authorities-set the stage for the fleeting years of success.
Currency Substitution as a Policy Restraint Without a rule-based monetary regime there are, nonetheless, some marketbased limits to the discretion of policymakers and the extent to which they can abuse fiscal and monetary policy. Still, these limits appear only when the economy labors under very stressful conditions, and when the reaction of the public is such as to preclude further abuse. The Argentine government was to discover these limits in the crisis of 1890, a time when policy inconsistencies brought the use of paper money almost to a standstill and one of the world’s earliest episodes of capital fight taught an important lesson.
These are vital questions, and, short of peering into a crystal ball, they can only be answered by peering into the murkier depths of the past to get a glimpse of how similar institutions have succeeded and failed. In the historicallaboratorywe can ask questions that inform our present situation: Was Argentina’s search for macroeconomic stability successful in the late nineteenth and early twentieth century? How did changing domestic and international conditions affect the outcome? What political economy obstacles stood in the way and how were they surmounted, if at all?
