The Burden That Inflation Imposes On Society: The Case Of Argentina
Perrotta, Fernanda Analia
Area of Honors:
Bachelor of Science
Dr. Russell Paul Chuderewicz, Thesis Supervisor David Shapiro, Honors Advisor
Seigniorage Convertibility Plan Argentina Hyperinflation Laffer Curve Gini Index Lorenz Curve
This thesis analyzes Argentina’s economy from 1983-2001. In the first part of the thesis, I focus on the different ways of financing the Argentinean government’s budget deficits. In particular, I focus on the analysis of seigniorage. I explain how the government used and relied on seigniorage to finance its deficits. Particularly, I focus on the hyperinflationary event that took place in 1989 in Argentina. I use the Laffer curve as a base model for my seigniorage model, and I analyze seigniorage in several different aspects. I use a growth Laffer curve, and I create a model to find the optimal inflation rate that maximizes seigniorage. In the second part of the thesis, I analyze the Convertibility Plan installed in 1991 in Argentina. I analyze the economic period, and I explain why the plan failed in 2001. I conclude that neither the model of the 1980’s nor the convertibility plan in the 1990’s was welfare enhancing, and I use the Gini coefficient to show how inequality increased in both decades.