Skip to main content Accessibility help

Long-run fiscal dominance in Argentina, 1875–19901

  • María Dolores Gadea (a1), Marcela Sabaté (a1) and Isabel Sanz (a1)


For most of the twentieth century, Argentina solved the macroeconomic policy trilemma through domestic monetary sovereignty. This article illustrates how the need to finance deficits was behind Argentine sovereignty. We test the hypothesis of fiscal dominance between 1875 and the approval of the Austral Plan in 1991 and find that deficits drove money creation in the long run. The article also reveals how fiscal dominance, in a scenario of increasing currency substitution, helps to explain the dynamics of Argentine inflation in the second half of the twentieth century.



Hide All

The authors sincerely want to thank three anonymous referees and the editor of the review for their detailed and helpful comments on previous drafts of this paper. We have received financial support from the Spanish Ministry of Sciences and Innovation (ECO 2009-08204 and ECO 2012-32837) and the Diputación General de Aragón (SEIM Research Group, SEC 26962 projects).



Hide All
Andrews, D. W. K. (1991). Heteroskedasticity and autocorrelation consistent covariance matrix estimation. Econometrica, 59, pp. 817–58.
Bai, J. and Perron, P. (1998). Estimating and testing linear models with multiple structural changes. Econometrica, 66, pp. 4778.
Bai, J. and Perron, P. (2003a). Critical values of multiple structural change tests. The Econometrics Journal, 6, pp. 72–8.
Bai, J. and Perron, P. (2003b). Computation and analysis of multiple structural-change models. Journal of Applied Econometrics 18, pp. 122.
Banco Central De la República Argentina Data available at
Beckerman, P. (1992). Public sector debt distress in Argentina 1988–89. Policy Research. World Bank Working Paper Series, no. 902.
Bordo, M. and Schwartz, A. (1996). The operation of the specie standard: evidence for core and peripheral countries, 1880–1990. In Eichengreen, B. and de Macedo, J. Braga (eds.), Historical Perspectives on the Gold Standard: Portugal and the World. London: Routledge, pp. 1183.
Calvo, G. and Végh, C. A. (1992). Currency substitution in developing countries: an introduction. IMF Working Paper (May).
Calvo, G. and Végh, C. A. (1999). Inflation stabilization and BOP crisis in developing countries. In Taylor, J. B. and Woodford, M. (ed.), Handbook of Macroeconomics, vol. 1. Amsterdam: North Holland, pp. 15311614.
Catão, L. A. V. and Terrones, M. E. (2005). Fiscal deficits and inflation. Journal of Monetary Economics, 52, pp. 529–54.
Cavallo, D. F., Dómenech, R. A. and Mundlak, Y. (1986). Estadísticas de la evolución económica de Argentina, 1913–1984. Estudios, no. 39, IEERAL (July/September).
Cavallo, D. F. and Peña, A. (1983). Déficit fiscal, endeudamiento del gobierno y tasa de inflación: Argentina, 1940–1982. Estudios no. 26, IEERAL (April/June).
Cortés Conde, R. (1989). Dinero, deuda y crisis: evolución fiscal y monetaria en la Argentina, 1862–1890. Buenos Aires: Editorial Sudamérica.
Cortés Conde, R. (2005). La economía política de la Argentina en el siglo XX. Buenos Aires: EDHASA.
Della Paolera, G., Bózzoli, C. G. and Taylor, A. (2003a). Historical statistics. In Paolera, G. Della and Taylor, A. (eds.), A New Economic History of Argentina. Cambridge: Cambridge University Press, chapter 13.
Della Paolera, G., Irigoin, M. A. and Bózzoli, C. G. (2003b). Passing the buck: monetary and fiscal policies. In Paolera, G. Della and Taylor, A. (eds.), A New Economic History of Argentina. Cambridge: Cambridge University Press, chapter 3.
Della Paolera, G. and Ortíz, J. (1995). Dinero, intermediación financiera y nivel de actividad en 110 años de historia económica Argentina. Documentos de Trabajo, Universidad Torcuato di Tella, December.
Della Paolera, G. and Taylor, A. (2001). Straining at the Anchor. National Bureau of Economic Research.
Díaz Alejandro, C. F. (1975). Ensayos sobre la historia económica Argentina. Buenos Aires: Amorrortu Editores.
Dickey, D. A. and Fuller, W. A. (1981). Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica, 49, pp. 1057–72.
Di Tella, G. (1989). Argentina's economy under a Labour-based government, 1973–6. In Tella, G. Di and Dornbusch, R. (eds.), The Political Economy of Argentina, 1946–83. Pittsburg, PA: University of Pittsburg Press, chapter 11.
Dornbusch, R. (1990). Experiences with extreme monetary instability. Discussion Paper no. 455, September, Centre for Economic Policy Research.
Dornbusch, R. and De Pablo, J. C. (1987). Argentina: debt and macroeconomic instability. NBER Working Paper Series, no. 2378.
Dornbusch, R. and Simonsen, M. H. (1987). Inflation, stabilization with incomes policy support: a review of the experience in Argentina, Brazil and Israel. NBER Working Paper Series, no. 2153.
Dornbusch, R., Sturzenegger, F. and Holger, W. (1990). Extreme inflation: dynamics and stabilization. Brookings Papers on Economic Activity, 2, pp. 164.
Feige, E. L., Sosic, V.Faulend, M. and Sonje, V. (2002). Unofficial dollarization in Latin America: currency substitution, network externalities and irreversibility. In Dean, W. D, Salvatore, D. and Willet, T. (eds.), Dollarizing the Americas. New York: Oxford University Press.
Gerchunoff, P. (1989). Peronist economic policies, 1946–55. In Di Tella, G. and Dornbusch, R. (eds.), The Political Economy of Argentina, 1946–83. Pittsburg, PA: University of Pittsburg Press, chapter 4.
Gerchunoff, P. and Llach, L. (2003). El ciclo de a ilusión y el desencanto: un siglo de políticas económicas argentinas. Auenos Aires: Ariel Sociedad Económica.
Giovannini, A. and Turtelboom, B. (1992). Currency substitution. NBER Working Paper Series, WP no. 4232 (December).
Granger, C. W. J. (1969). Investigating casual relations by econometric models and cross-spectral methods. Econometrica, 37, pp. 424–38.
Granger, C. W. J. (1988). Some recent developments in a concept of causality. Journal of Econometrics, 39, pp. 199211.
Honohan, P. (1996). Does it matter how seigniorage is measured? Applied Financial Economics, 6(3), pp. 293300.
Ilzetzki, E. O., Reinhart, C. M. and Rogoff, K. S. (2008). Exchange rate arrangements into the 21st century: will the anchor currency hold? Data available at
Kamin, S. B. and Ericsson, N. R. (1993). Dollarization in Argentina. International Finance Discussion Papers, November, no. 460.
Kamin, S. B. and Ericsson, N. R. (2003). Dollarization in post-hyperinflationary Argentina. Journal of International Money and Finance, 22, pp. 185211.
Kiguel, M. A. (1989). Inflation in Argentina: stop and go since the Austral Plan. World Bank Working Paper 162.
Kiguel, M. and Liviatan, N. (1992). Stopping three big inflations (Argentina, Brazil and Peru). World Bank Working Paper no. 999.
Kiguel, M. A. and Neumeyer, P. A. (1995). Seigniorage and inflation: the case of Argentina. Journal of Money, Credit and Banking, 27(3), pp. 672–82.
King, R. and Plosser, C. (1985). Money, deficit and inflation. Carnegie-Rochester Conference Series, 22, pp. 147–96.
Kwiatkowski, D., Phillips, P. C. B., Schmidt, P. and Shin, Y. (1992). Testing the null hypothesis of stationarity against the alternative of a unit root: how sure are we that economic time series have a unit root? Journal of Econometrics, 54, pp. 159–78.
Mckinnon, J. G. (1996). Numerical distribution functions for unit root and cointegration tests. Journal of Applied Econometrics, 11(6), pp. 601–18.
Newey, W. and West, K. (1994). Automatic lag selection in covariance matrix estimation. Review of Economic Studies, 61, pp. 631–53.
Ng, S. and Perron, P. (2001). Lag length selection and the construction of unit root tests with good size and power. Econometrica, 69, pp. 1519–54.
Obstfeld, M. and Taylor, A. M. (1998). The Great Depression as a watershed: international capital mobility over the long-run. In Bordo, M. D., Goldin, C. and White, E. (eds.), The Defining Moment: The Great Depression and the American Economy in the Twentieth Century. Chicago: Chicago University Press, pp. 353402.
Obstfeld, M. and Taylor, A. M. (2003). Globalization and capital markets. In Bordo, M. D., Taylor, A. M. and Williamson, J. (eds.), Globalization in Historical Perspective: Globalization and Capital Markets. Chicago: National Bureau of Economic Research, pp. 121–83.
Obstfeld, M., Shambaugh, J. C. and Taylor, A. M. (2004). Monetary sovereignty, exchange rates, and capital controls: the trilemma in the interwar period. IMF Staff Papers, 51, special issue.
Obstfeld, M., Shambaugh, J. C. and Taylor, A. M. (2005). The trilemma in history: tradeoffs among exchange rates, monetary policies, and capital mobility. Review of Economics and Statistics, 87(3), pp. 423–38.
Perron, P. and NG, S. (1998). An autoregressive spectral density estimator at frequency zero for nonstationarity tests. Econometric Theory, 14, pp. 560603.
Pesaran, M. H. and SHIN, Y. (1999). An autoregressive distributed lag approach to cointegration analysis. In Storm, S. (ed.), Econometrics and Economic Theory in the 20th Century: The Ragnar Fisch Centennial Symposium. Cambridge: Cambridge University Press, chapter 11.
Phillips, P. C. B. and Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75, pp. 335–46.
Quinn, D. P. (2003). Capital account liberalization and financial globalization, 1890–1999: a synoptic view. International Journal of Finance & Economics, 8, pp. 189204.
Quinn, D. P. and Toyoda, A. M. (2007). Ideology and voter preferences as determinants of financial globalization. American Journal of Political Science, 45, pp. 344–67.
Reinhart, C. M. (2002). The country histories, 1946–2001. Material to A Modern History of Exchange Rate Arrangements: A Reinterpretation. Data available at
Reinhart, C. M. and Rogoff, K. S. (2004). The modern history of exchange rate arrangements: a reinterpretation. Quarterly Journal of Economics, 119, pp. 148.
Rodríguez, C. A. (1991). The macroeconomics of the public sector deficit: the case of Argentina. World Bank Working Paper no. 632.
Rock, D. (1987). Argentina, 1516–1987: From Spanish Colonization to Alfonsín. Berkeley: University of California Press.
Sargent, T. J. (1999). A primer on monetary and fiscal policy. Journal of Banking & Finance, 23, pp. 1463–82.
Sargent, T. J. and Wallace, N. (1981). Some unpleasant monetarist arithmetic. Federal Reserve Bank of Minneapolis Quarterly Review, pp. 117.
Sargent, T. J., Williams, N. and Zha, T. (2009). The conquest of South American inflation. Journal of Political Economy, 117(21), pp. 211–55.
Secretaría de Hacienda del Ministerio de Economía y Producción (2005). Sector Público Argentino no Financiero, Cuenta de Ahorro-Inversión, Financiamiento, 1961–2004.
Shambaugh, J. C. (2004). The effect of fixed exchange rates on monetary policy. Quarterly Journal of Economics, 119(1), pp. 301–52.
Torre, J. C. and De Riz, L. (1993). Argentina since 1946. In Bethell, L. (ed.), Argentina since Independence. Cambridge: Cambridge University Press, chapter 7.


JEL classification

Long-run fiscal dominance in Argentina, 1875–19901

  • María Dolores Gadea (a1), Marcela Sabaté (a1) and Isabel Sanz (a1)


Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed