Hostname: page-component-76fb5796d-qxdb6 Total loading time: 0 Render date: 2024-04-26T00:44:34.969Z Has data issue: false hasContentIssue false
  • English
  • Français

SHORT- AND LONG-RUN EFFECTS OF DEVALUATIONS: EVIDENCE FROM ARGENTINA

Published online by Cambridge University Press:  21 March 2022

Luciano Campos Open the ORCID record for Luciano Campos [Opens in a new window]
Luciano Campos*
Affiliation:
Universidad de Alcalá and RedNIEa
Get access Rights & Permissions [Opens in a new window]

Abstract

Devaluations were traditionally considered to be expansionary in the short run and have no real long-run effects. Alternatively, some observers in developing countries found that devaluations were contractionary on impact, and that they might foster long-term growth. Using Argentina as a case study, which is convenient due to its long series availability and its subsequent switches in exchange rate regimes, four structural shocks are identified in line with the traditional and alternative views. It is found that devaluations were mostly contractionary, and that real long-run effects were only possible when inflation was either low or moderate. In light of the estimates, a historical revision of Argentinean devaluation episodes from 1854 to 2018 has been carried out.

Resumen

RESUMEN

Tradicionalmente se consideraba que las devaluaciones eran expansivas a corto plazo y no tenían efectos reales a largo plazo. Por otra parte, algunos observadores de países en desarrollo encontraron que las devaluaciones eran contractivas y que podían fomentar el crecimiento a largo plazo. Tomando a Argentina como caso de estudio, lo cual es conveniente por su disponibilidad de series largas y sus subsecuentes cambios en los regímenes cambiarios, se identifican cuatro choques estructurales en línea con las visiones tradicionales y alternativas. Se encuentra que las devaluaciones fueron mayoritariamente contractivas y que los efectos reales a largo plazo solo fueron posibles cuando la inflación fue baja o moderada. A la luz de estos resultados, se realiza una revisión histórica de las devaluaciones argentinas de 1854 a 2018.

Keywords

exchange rate devaluationseconomic growthstructural BVARsArgentinaC32F31N16devaluaciones cambiariascrecimiento económicoBVARs estructuralesArgentina
Type
Articles/Artículos
Information
Revista de Historia Economica - Journal of Iberian and Latin American Economic History , Volume 41 , Issue 2 , September 2023 , pp. 213 - 241
Check for updates
Copyright
Copyright © The Author(s), 2022. Published by Cambridge University Press on behalf of Instituto Figuerola, Universidad Carlos III de Madrid

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

a

Departamento de Economía, Alcala de Henares, Spain. luciano.campos@uah.es

References

REFERENCES

Alexander, S. (1959): «Effects of a Devaluation: A Simplified Synthesis of Elasticities and Absorption Approaches». The American Economic Review 49 (1), pp. 22-44.Google Scholar
Arias, J., Rubio-Ramírez, J., and Waggoner, D. (2014): «Inference Based on SVARs Identified with Sign and Zero Restrictions: Theory and Applications». Working paper, Federal Reserve Board (1100).CrossRefGoogle Scholar
Bahmani-Oskooee, M. (1985): «Devaluation and the J-Curve: Some Evidence From LDCs». The Review of Economics and Statistics 67 (3), pp. 500-504.CrossRefGoogle Scholar
Bahmani-Oskooee, M., and Miteza, I. (2006): «Are Devaluations Contractionary? Evidence from Panel Cointegration». Economic Issues 11 (1), pp. 49-64.Google Scholar
Bértola, L., and Ocampo, J. (2012): The Economic Development of Latin America since Independence. Oxford: Oxford University Press.CrossRefGoogle Scholar
Berument, H., and Pasaogullari, M. (2003): «Effects of the Real Exchange Rate on Output and Inflation: Evidence from Turkey». The Developing Economies 56 (4), pp. 401-435.CrossRefGoogle Scholar
Boonman, T. M. (2017): «The Economic Impact of Sovereign Defaults in Latin America 1870-2012». Revista de Historia Económica/Journal of Iberian and Latin American Economic History 35 (1), pp. 81-104.CrossRefGoogle Scholar
Bordo, M. D., and Rockoff, H. (1996): «The Gold Standard as a ‹Good Housekeeping Seal of Approval›». The Journal of Economic History 56 (2), pp. 389-428.CrossRefGoogle Scholar
Brambilla, I., Galiani, S., and Porto, G. (2018): «Argentine Trade Policies in the XX Century: 60 Years of Solitude». Latin American Economic Review 27 (4), pp. 1-30.CrossRefGoogle Scholar
Buera, F., Navarro, G., and Nicolini, J. (2011): «The Argentine Economy after Two Centuries». Latin American Journal of Economics 48 (2), pp. 133-156.CrossRefGoogle Scholar
Burstein, A., Eichenbaum, M., and Rebelo, S. (2005): «Large Devaluations and the Real Exchange Rate». Journal of Political Economy 113 (4), pp. 742-748.CrossRefGoogle Scholar
Burstein, A., Eichenbaum, M., and Rebelo, S. (2007): «Modeling Exchange Rate Passthrough after Large Devaluations». Journal of Monetary Economics 54 (2), pp. 346-368.CrossRefGoogle Scholar
Bussière, M., Saxena, S., and Tovar, C. (2012): «Chronicle of Currency Collapses: Reexamining the Effects on Output». Journal of International Money and Finance 31 (4), pp. 680-708.CrossRefGoogle Scholar
Cavallo, A. (2012): «Online and Official Price Indexes: Measuring Argentina's Inflation». Journal of Monetary Economics 60 (2), pp. 152-165.CrossRefGoogle Scholar
Cerro, A., and Meloni, O. (2013): «Crises and Crashes: Argentina 1825-2002». Revista de Historia Económica/Journal of Iberian and Latin American Economic History 31 (2), pp. 219-252.CrossRefGoogle Scholar
Cerra, V., and Saxena, S. (2008): «Growth Dynamics: The Myth of Economic Recovery». The American Economic Review 98 (1), pp. 439-457.CrossRefGoogle Scholar
Cerro, A., and Meloni, O. (2014): «Making Explosive Cocktails: Recipes and Costs of 20 Argentine Crises from 1865 to 2004». Economic History Research 10 (2), pp. 104-114.Google Scholar
Cooper, R. N. (1971): Currency Devaluation in Developing Countries. International Finance Section, Princeton, New Jersey, Princeton University Press.Google Scholar
Díaz Fuentes, D. (1998): Latin America during the Interwar Period: The Rise and Fall of the Gold Standard in Argentina, Brazil, and Mexico. Latin America and the World Economy since 1800. Cambridge, MA: Harvard University Press.Google Scholar
Díaz-Alejandro, C. (1963): «A Note on the Impact of Devaluation and the Redistributive Effect». Journal of Political Economy 71 (6), pp. 557-580.Google Scholar
Díaz-Alejandro, C. (1965): Exchange-rate Devaluation in a Semi-Industrialized Country. The Experience of Argentina, 1955-1961. Cambridge, MA: The MIT Press.Google Scholar
Díaz-Alejandro, C. (1970): Essays on the Economic History of the Argentine Republic. New Haven and London: Yale University Press.Google Scholar
Díaz-Bonilla, E., and Schamis, H. E. (2001): From Redistribution to Stability: The Evolution of Exchange Rate Policies in Argentina, 1950-98. The Currency Game: Exchange Rate Politics in Latin America. Washington, DC: Johns Hopkins University Press.Google Scholar
Edwards, S. (1986): «Are Devaluations Contractionary?». The Review of Economics and Statistics 68 (3), pp. 501-508.CrossRefGoogle Scholar
Edwards, S. (2002): «The Great Exchange Rate Debate after Argentina». The North American Journal of Economics and Finance 13 (3), pp. 237-252.CrossRefGoogle Scholar
Enders, W., and Lee, B. (1997): «Accounting for Real and Nominal Exchange Rate Movements in the Post-Bretton Woods Period». Journal of International Money and Finance 16 (2), pp. 233-254.CrossRefGoogle Scholar
Ferrer, A. (2004): La economía argentina. Desde sus orígenes hasta principios del siglo XXI. Buenos Aires, Fondo de Cultura Econόmica.Google Scholar
Ferreres, O. (2005): Dos siglos de economía argentina 1810-2004. Fundaciόn Norte y Sur.Google Scholar
Ford, A. (1962): The Gold Standard, 1880-1914: Britain and Argentina. London: Clarendon Press.Google Scholar
Frenkel, R. (2002): «Argentina: A Decade of the Convertibility Regime». Brazilian Journal of Political Economy 22 (4), pp. 567-578.CrossRefGoogle Scholar
Frenkel, R., and Rapetti, M. (2008): «Five Years of Competitive and Stable Real Exchange Rate in Argentina, 2002-2007». International Review of Applied Economics 22 (2), pp. 215-226.CrossRefGoogle Scholar
Fry, R., and Pagan, A. (2011): «Sign Restrictions in Structural Vector Autoregressions: A Critical Review». Journal of Economic Literature 49 (4), pp. 938-960.CrossRefGoogle Scholar
Gerchunoff, P., and Llach, L. (2009): «Equality or Growth: A 20th Century Argentine Dilemma». Revista de Historia Económica/Journal of Iberian and Latin American Economic History 27 (3), pp. 397-426.CrossRefGoogle Scholar
Gerchunoff, P., and Llach, L. (2018): El ciclo de la ilusiόn y el desencanto. Políticas económicas argentinas de 1880 a nuestros días. Buenos Aires, Editorial Paidόs, Crítica.Google Scholar
González, G., and Viego, V. (2011): «The Argentine Failure from A Comparative Perspective: The Role of Total Factor Productivity». Revista de Historia Económica/Journal of Iberian and Latin American Economic History 29 (3), pp. 301-326.CrossRefGoogle Scholar
Guzmán, M., Ocampo, J., and Stiglitz, J. (2018): «Real Exchange Rate Policies for Economic Development». World Development 110, pp. 51-62.CrossRefGoogle Scholar
Gylfason, T., and Schmid, M. (1983): «Does Devaluation Cause Stagflation?». The Canadian Journal of Economics 16 (4), pp. 641-654.CrossRefGoogle Scholar
Harberger, A. (1950): «Currency Depreciation, Income, and the Balance of Trade». Journal of Political Economy 58 (1), pp. 47-60.CrossRefGoogle Scholar
Hausmann, R., Pritchett, L., and Rodrik, D. (2005): «Growth Accelerations». Journal of Economic Growth 10, pp. 303-329.CrossRefGoogle Scholar
Hsing, Y. (2004): «Responses of Argentine Output to Shocks to Monetary Policy, Fiscal Policy, and Exchange Rates: A VAR Model». Applied Econometrics and International Development 4 (1), pp. 21-36.Google Scholar
Johnson, H. (1976): «Elasticity, Absorption, Keynesian Multiplier, Keynesian Policy, and Monetary Approaches to Devaluation Theory: A Simple Geometric Exposition». The American Economic Review 66 (3), pp. 448-452.Google Scholar
Johnson, H. (1977): «The Monetary Approach to the Balance of Payments: A Nontechnical Guide». Journal of International Economics 7 (3), pp. 251-268.CrossRefGoogle Scholar
Kamin, S., and Rogers, J. (2000): «Output and the Real Exchange Rate in Developing Countries: An Application to Mexico». Journal of Development Economics 61 (1), pp. 85-109.CrossRefGoogle Scholar
Kilian, L., and Lütkepohl, H. (2017): Structural Vector Autoregressive Analysis. Cambridge, United Kingdom: Cambridge University Press.CrossRefGoogle Scholar
Kohn, D., Leibovici, F., and Szkup, M. (2020): «Financial Frictions and Export Dynamics in Large Devaluations». Journal of International Economics 122 (C), pp. 445-456.CrossRefGoogle Scholar
Krugman, P., and Taylor, L. (1978): «Contractionary Effects of Devaluation». Journal of International Economics 8, pp. 445-456.CrossRefGoogle Scholar
Laursen, S., and Metzler, L. (1950): «Flexible Exchange Rates and the Theory of Employment». The Review of Economics and Statistics 32 (4), pp. 281-299.CrossRefGoogle Scholar
Levy-Yeyati, E., Sturzenegger, F., and Gluzmann, P. (2012): «Exchange Rate Undervaluation and Economic Growth: Díaz-Alejandro (1965) Revisited». Economics Letters 117 (3), pp. 666-672.Google Scholar
Odusola, A., and Akinlo, A. (2001): «Output, Inflation and Exchange Rate in Developing Countries: An Application to Nigeria». The Developing Economies 39 (2), pp. 199-222.CrossRefGoogle Scholar
Rapoport, M. (2012): Historia Económica, Política y Social de la Argentina, 1880-2003. Buenos Aires: Emecé.Google Scholar
Razmi, A., Rapetti, M., and Skott, P. (2012): «The Real Exchange Rate and Economic Development». Structural Change and Economic Dynamics 23, pp. 151-169.CrossRefGoogle Scholar
Rodrik, D. (2008): «The Real Exchange Rate and Economic Growth». Brooking Papers on Economic Activity (2), pp. 365-412.Google Scholar
Sanz, M. I. (2009): «Macroeconomic Outcomes and the Relative Position of Argentina's Economy: 1875-2000». Journal of Latin American Studies 41 (2), pp. 309-346.Google Scholar
Sidrauski, M. (1968): «Devaluación, Inflación y Desempleo». Económica 14 (1-2), pp. 79-107.Google Scholar
Tang, B. (2015): «Real Exchange Rate and Economic Growth in China: A Cointegrated VAR Approach». China Economic Review 34, pp. 293-310.CrossRefGoogle Scholar
Taylor, A. (1998): «Argentina and the World Capital Market: Saving, Investment, and International Capital Mobility in the Twentieth Century». Journal of Development Economics 57 (1), pp. 147-184.CrossRefGoogle Scholar
Taylor, A. (2018): «The Argentina Paradox: Microexplanations and Macropuzzles». Latin American Economic Review 27 (3), pp. 1-17.CrossRefGoogle Scholar