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

Abstract

Did macroconomic interventions make any contribution to Argentina's revovery from the Great Depression? Macroeconomic policy deviated from gold-standard orthodoxy after the final suspension of convertibility in 1929. Fiscal policy was conservative. Monetary policy became unorthodox after 1931, when the Caja de conversión began rediscounting to sterilize gold outflows and avoid deflation. This change predated the creation of the central bank in 1935. A wider literature links the interwar depression in the core to flaws in the gold standard, and active monetary policy to escape from defaltion and slump; our work extends this idea to the periphery.