The Economic History of Monetary and Financial Markets in the Nineteenth and Early Twentieth Century in Argentina: Observers, Actors and Outcomes

Abstract

The systematic study of the Argentine monetary and financial history is a phenomenon of recent and growing interest. Perhaps the fact that during the 1980s Argentina experienced drastic credit and monetary crunches that lead to the virtual disappearance of the domestic currency encouraged an important number of scholars to address the subject. The paper survey several factors that influenced the pattern of growth. The first sections address the phenomenon of inflation during the early national period, the colonial inheritance, emphasizing the mechanism that generated and propagated price instability. The same section addresses a critical problem confronting the monetary authorities in a federal system, namely the "appropriation of seigniorage''. This is reflected in the ambivalent position of economic and political policymakers facing the choice between establishing a monopolistic type of monetary institutions or allowing competing monies. The second section discusses the classical dilemma of floating versus fixed exchange rates: the choice of the monetary regime, anchor for prices. and interest rates. The third section focuses on the most vexing element in the conduct of an expansionary fiscal and monetary policy: the phenomenon of currency substitution. The fourth section considers the management of the public debt, the market for bonds and the significance of reputation and credibility in a recently settled economy. The fifth draws on the Gesell-Fisher paradigm (disruptive effects of deflationary pressures on investment) to consider policy options used to combat the impact of the Great Depression. The final section uses contemporary and current analysis to examine macroecormmic and microeconomic tensions resulting from having at the same time, a Convers·on Office (i.e. Currency Board) and a system of banks that "create" money.