Economic Recovery from the Argentine Great Depression: Institutions, Expectations, and the Change of Macroeconomic Regime

Abstract

We ask how Argentina overcame the Great Depression and if macroeconomic interventions made any contribution to the recovery. Argentine macroeconomic policy deviated from gold-standard orthodoxy after the final suspension of convertibility in 1929. As elsewhere. fiscal policy in Argentina was conservative. Monetary policy became unorthodox after 1931 when the Caja de Conversion (Conversion Office. a currency board) began rediscounting to sterilize gold outflows and avoid deflation. This change of regime predated a later. and supposedly more significant, stage of institutional reform. namely the creation of the central bank in 1935. A wider literature links the interwar depression in the core economies to flaws in the gold standard and emphasizes the connection between active monetary policy and escape from deflation and slump~ our work extends this idea to the periphery.