How to focus the economy and economic policy in Argentina forward? Regarding economic modeling work carried out at the BCRA

Abstract

Decision-making in the field of economic policy, given the natural features of uncertainty, benefits from the availability of “modeled constructions” that contribute to the understanding of the economic phenomenon and the possibility of making projections, even though in no way determine, merely by themselves, the decision of the political authorities. The work “A Small Economic Model for Argentina” constitutes a contribution in that sense. Naturally, such presentations are tributary, in a cryptic or underlying way, of a fundamental vision about the articulation of the economy and the strategies involved. At this level it is worth making some considerations. Especially when, as Hernán Lacunza expresses it well in the editorial note of that work, we face the “reality of a developing country”. In this order, the cited work, which appeals to a basic model and an extended model in which more attention is paid to policy alternatives, uses as a reference in the first case the “standard” or canonical inflation targeting model, which is hardly revealed as the most appropriate for the “reality of a developing country”. The extended model, on the contrary, takes a big step forward because it contemplates the policy option preferred by the BCRA during these years, consisting of simultaneous intervention in the money and foreign exchange markets. An approach that disagrees with the standard vision and is more inclined to a pro-development vision. Thus, a dissonance is perceived between the basic model and the extended one, which appears as “extrinsic” to the first, which, precisely, alludes to the basic configuration of the Argentine economy and the most idiosyncratic policy rules. This will not be innocuous when it comes to “measuring” the effects derived from the operation of both models (“more persistence” in the extended model). Alternatively, this note expands, as a heuristic resource, a presentation that alludes to two models, one basic and the other more related to policies, which show as a characteristic a greater congruence with each other and a greater affinity with pro-development considerations. And, as for the operating effects, it allows contrasting persistence phenomena with hysteresis phenomena. Being that the guidelines that emerge in each case for making economic policy decisions differ from each other. In short, to enrich the contribution that the work “A Model… “ implies in the direction of the just mentioned characteristic, it would be advisable to: a) include the political option preferred during all these years by the BCRA directly in the basic model, and, b) incorporate in consideration income policy, which is clearly missing in the aforementioned work.

JEL classification: E10