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Web Articles
How would dollarisation affect Argentina’s competitiveness?
Economics Observatory
Argentina is in the middle of substantial economic reforms, both on the fiscal and monetary side. The country’s monetary policy programme aims to introduce a free competition of currencies, which […]
Argentina is in the middle of substantial economic reforms, both on the fiscal and monetary side. The country’s monetary policy programme aims to introduce a free competition of currencies, which would mean allowing multiple currencies to be used and to compete freely. Although official dollarisation (replacing the local currency with the US dollar) is unlikely to happen, according to recent government announcements, it might emerge as a potential outcome considering that it was a central part of the president’s economic agenda during the election campaign.
Research on optimum currency areas (which explores the extent to which geographical regions should share a common currency) does not show conclusively that dollarisation decreases exports or undermines external competitiveness. Yet insights from both economic theory and Argentina’s history indicate that dollarisation is likely to have a negative impact on the country’s ability to achieve export-led economic growth.
In this article, the authors examine:
- President Milei’s plan for monetary policy
- What would dollarisation mean for Argentina’s export competitiveness?
- What lessons can we draw from Argentina’s economic history?
The Economics Observatory (ECO) is a new project that bridges the gap between academic research, government policy and the general public. It’s led by Richard Davies, Professor in Practice at the London School of Economics’ School of Public Policy and director of the Growth Lab’s research collaboration at LSE.
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Web Articles
What Economic Challenges Does Argentina Face Today?
Economics Observatory
With one of the world’s highest inflation rates and after more than a decade of economic stagnation and rising poverty, Argentina once again finds itself teetering on the brink of […]With one of the world’s highest inflation rates and after more than a decade of economic stagnation and rising poverty, Argentina once again finds itself teetering on the brink of economic collapse. The urgent need for a plan to stabilise the economy has entrusted the newly elected President Javier Milei with a clear mandate: eradicate inflation and reignite economic growth. As the nation watches with a mixture of exhaustion and bated breath, the world also turns its gaze to Argentina, wondering whether Milei’s strategies will be the long-awaited remedy for the country’s struggles.
The deep-rooted cause of Argentina’s economic distress and chronic inflation is persistent public overspending financed by money creation. This understanding lies at the core of Milei’s policy agenda. While the plans signal a move in the right direction, there are no silver bullets. Achieving low and stable inflation involves difficult trade-offs; implementation is challenging; and reforms often take time to bear fruit.
In this article, the authors examine:
- The longstanding causes of Argentina’s economic struggles
- President Milei’s fiscal and monetary policy approaches
- What future challenges the government might face
The Economics Observatory (ECO) is a new project that bridges the gap between academic research, government policy and the general public. It’s led by Richard Davies, Professor in Practice at the London School of Economics’ School of Public Policy and director of the Growth Lab’s research collaboration at LSE.
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Working Papers
An Integrated Epidemiological and Economic Model of COVID-19 NPIs in Argentina
We added a multi-sectoral economic framework to a SVEIR epidemiological model, combining the economic rationale of the DAEDALUS model with a detailed treatment of lockdown fatigue and declining compliance with […]We added a multi-sectoral economic framework to a SVEIR epidemiological model, combining the economic rationale of the DAEDALUS model with a detailed treatment of lockdown fatigue and declining compliance with Public Health and Social Measures reported in recent empirical work, to quantify the epidemic and economic benefits and costs of alternative lockdown and PHSM policies, both in terms of intensity and length. Our calibration replicates key features of the case and death-curves and economic cost for Argentina in 2021. The model allows us to quantify the short-term policy trade-off between lives and livelihoods and show that it can be significantly improved with targeted pharmaceutical policies such as vaccine rollout to reduce mainly severe disease and the death toll from COVID-19, as has been highlighted by previous studies. -
Journal Articles
Hard Money’s Soft Underbelly: Understanding the Argentine Crisis
Brookings Trade Forum, 59-104.
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Working Papers
Emerging Cities as Independent Engines of Growth: The Case of Buenos Aires
What does it take for a sub-national unit to become an autonomous engine of growth? This issue is particularly relevant to large cities, as they tend to display larger and […]What does it take for a sub-national unit to become an autonomous engine of growth? This issue is particularly relevant to large cities, as they tend to display larger and more complex know-how agglomerations and may have access to a broader set of policy tools. To approximate an answer to this question, specific to the case of Buenos Aires, Harvard’s Growth Lab engaged in a research project from December 2018 to June 2019, collaborating with the Center for Evidence-based Evaluation of Policies (CEPE) of Universidad Torcuato di Tella, and the Development Unit of the Secretary of Finance of the City of Buenos Aires. Together, we have developed research agenda that seeks to provide inputs for a policy plan aimed at decoupling Buenos Aires’s growth trajectory from the rest of Argentina’s.
Listen to the Growth Lab Podcast interview with the authors.
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Working Papers
Specificity of Human Capital: An Occupation Space Based on Job-to-Job Transitions
Using job transition data from Argentina’s Household Survey, we document the extent to which human capital is specific to occupations and activities. Based on workers’ propensity to move between occupations/industries, […]Using job transition data from Argentina’s Household Survey, we document the extent to which human capital is specific to occupations and activities. Based on workers’ propensity to move between occupations/industries, we build Occupation and Industry Spaces to illustrate job similarities, and we compute an occupation and industry similarity measures that, in turn, we use to explain wage transition dynamics. We show that our similarity measures influence positively post-transition wages. Inasmuch as wages capture a worker´s marginal productivity and this productivity reflects the degree to which a worker matches the job’s skill demand, our results indicate that a worker´s human capital is specific to both occupation and activity: closer occupations share similar skill demands and task composition (in other words, demand similar workers) and imply a smaller human capital loss in the event of a transition. -
Working Papers
Tax Avoidance in Buenos Aires: The Case of Ingresos Brutos
This study presents evidence of tax avoidance in Buenos Aires, Argentina. I exploit a break in the tax scheme of the most controversial tax, Ingresos Brutos (gross income), between the […]This study presents evidence of tax avoidance in Buenos Aires, Argentina. I exploit a break in the tax scheme of the most controversial tax, Ingresos Brutos (gross income), between the city and the greater area, which are otherwise identical law and regulation-wise for the studied population. When possible, workers would rather travel longer distances to their jobs than face the tax burden. Given that this type of avoidance is costly, results suggest that Ingresos Brutos might be acting as a binding constraint to growth for businesses.