Ensayos Económicos

In memoriam Roberto Cortés Conde

Javier Ortíz Batalla — 2025-04-01

Ensayos Económicos pays tribute to Roberto Cortés Conde, one of Argentina's leading economic historians who recently passed away, through a text by Javier Ortíz Batalla, which reviews his life and his main contributions to economic historiography.

From the Currency Board to the Central Bank

Roberto Cortés Conde — 2025-04-01

This paper analyzes the 1930 economic crisis in Argentina, highlighting its causes, development, and policy responses, in comparison to the events in the countries studied by Bernanke and James (1990). Unlike the U.S. crisis, marked by a stock market and financial collapse, the Argentine crisis was driven by the collapse of agricultural prices, which severely impacted both public and private revenues, triggering problems in the banking system and leading to a widespread recession. The study examines the measures adopted by the governments of Irigoyen, Uriburu, and Justo between 1929 and 1935, to determine whether these responses aimed to mitigate the contractionary effects or were pragmatic reactions to the severity of the events. The effects of the crisis in Argentina are compared with those in other countries. Additionally, the paper investigates the role of existing monetary institutions, particularly the Caja de Conversión, with its significant changes in 1931 and 1932, and the Central Bank established in 1935.

JEL Classification: N10; N16

The Real Plan Thirty Years Later. Selected Policy Afterthoughts

Gustavo H. B. Franco — 2025-04-01

The 30th anniversary of Brazil's Real Plan highlights its success in ending hyperinflation and establishing the country’s longest-lasting monetary stability. Implemented in 1994, the plan used innovative strategies like a floating and appreciating exchange rate, breaking inflationary expectations without the rigidity of a currency board. Key reforms, including more central bank independence, strengthened monetary governance, while market mechanisms pressured policymakers to implement fiscal and structural adjustments. Lessons from past failures emphasized the need for sustained reforms beyond initial gains. Despite criticisms about prolonged reliance on the exchange rate, the plan leveraged market mechanisms to pressure policymakers toward fiscal and structural reforms. These efforts culminated in a transition to inflation targeting and floating exchange rates in the late 1990s, reinforcing the stabilization process. Ultimately, the Real Plan’s success was rooted in its adaptability, strategic use of the exchange rate, and gradual implementation of fundamental reforms, securing its legacy as a model of stabilization under challenging conditions.

JEL Classification: E31; E50; E65

Economic Stabilization Experiences: The Case of Peru 1990-1991

Adrián Armas Rivas — 2025-04-01

Similar to other Latin American economies, Peru went through one of the most severe periods of macroeconomic imbalances reflected in inflation rates of up to four digits in the 1980s. After several failed stabilization attempts (called “paquetazos”) to combat hyperinflation with significant exchange rate adjustments (of the multiple exchange rate system) and partial fiscal adjustments, a novel stabilization program was implemented in 1990 coinciding with the change of government, the first in Latin America to use a monetary aggregate control scheme with a permanent
abandonment of the fixed exchange rate regime. The program had two clear stages. The first, between August 1990 and January 1991, focused on eliminating Central Bank financing of the treasury, and on reestablishing market mechanisms in determining prices, interest rates and the exchange rate. The second stage began in February 1991 with the complete liberalization of strict exchange and capital controls, which encouraged the repatriation of capital and the return of dollar currency to local banks. A bimonetary system was consolidated in which the national currency gradually regained the confidence of economic agents in a process that continues today. In this process, the establishment of the institutionality of macroeconomic policies was crucial; in particular, the autonomy of the central bank and fiscal discipline. This process constitutes a fundamental milestone for the Peruvian economy, which clearly divides a before of persistent macroeconomic imbalances and inefficient allocation of resources; and an after that presents sustained macroeconomic stability that promotes economic growth.

JEL Classification: E31; E42; E44; E52; E58; N26

Uruguay: A Story of Inflation Stabilization and De-dollarization in Three (?) Steps

Gerardo Licandro — 2025-04-01

This paper analyzes Uruguay's inflation stabilization process, highlighting historical challenges and lessons learned. For decades, the country faced episodes of high inflation, with failed stabilization attempts based on fixed exchange rate regimes that ended in balance of payments crises and monetized fiscal deficits. The stabilization plan implemented in the 1990s marked a turning point, combining a crawling exchange rate band as a nominal anchor, significant fiscal adjustments, and structural reforms in areas such as social security, the financial system, and the public sector. Uruguay achieved low inflation from 1998 onwards, and while the plan culminated in the 2002 crisis, monetary policy remained firmly committed to avoiding inflationary financing of the fiscal deficit—a key factor in preserving the progress on inflation control. Uruguay's experience underscores the importance of strong fiscal anchors, structural reforms, and prudential regulations to stabilize an economy. However, dollarization persists as an economic and cultural challenge, along with the development of local currency markets.

JEL Classification: E31; E50; E65

Short-term inflation forecasting in Argentina with Random Forest models

Federico D. Forte — 2025-04-01

This paper examines the performance of Random Forest models for forecasting short-term monthly inflation in Argentina, especially for the current month or the following. Using a database with indicators on a monthly basis since 1962, it is concluded that these models achieve a
forecasting accuracy statistically comparable to the consensus of market analysts surveyed by the Central Bank of the Argentine Republic (BCRA) and to traditional econometric models. One advantage of Random Forest models is that, as they are non-parametric, they allow for the exploration of nonlinear effects in the predictive power of certain macroeconomic variables on inflation. It is found, among other things, that: 1) the relative relevance of the exchange rate gap for forecasting inflation grows when the gap between the parallel and official exchange rates exceeds 60%; 2) the predictive power of the exchange rate on inflation increases when the BCRA's net international reserves are negative or close to zero (specifically, less than USD 2 billion); 3) the relative relevance of lagged inflation and the nominal interest rate to forecast inflation for the following month increases when the level of inflation and/or the level of the interest rate rise.

Date of presentation: 09-18-2024

Date of approval: 11-25-2024

JEL Classification: C14; E31; E37

Measuring Inflation Expectations in Argentina: Economic Analysts versus Financial Markets

Patricio J. Temperley — 2025-04-01

Inflation in Argentina over the past few years has been high and volatile, making it increasingly important to forecast it accurately in the short term. This paper compares the predictive power of monthly inflation projections made by economic consultants surveyed by the Central Bank through the Market Expectations Survey (REM) and implicit inflation (break-even) in financial markets, derived from Nelson-Siegel-Svensson models on zero-coupon curves. The results suggest that REM expectations were a better reference for forecasting the evolution of inflation in Argentina in the short term during 2020-2023.

Date of presentation: 10-07-2024

Date of approval: 11-26-2024

JEL Classification: E31; E44; E47