The Burden That Inflation Imposes On Society: The Case Of Argentina

Open Access
Author:
Perrotta, Fernanda Analia
Area of Honors:
Economics
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Russell Paul Chuderewicz, Thesis Supervisor
  • David Shapiro, Honors Advisor
Keywords:
  • Seigniorage
  • Convertibility Plan
  • Argentina
  • Hyperinflation
  • Laffer Curve
  • Gini Index
  • Lorenz Curve
Abstract:
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.