Balance of payments constraint to growth, structural change and fiscal policy in Argentina (1950-2019)

MATÍAS TORCHINSKY LANDAU

Virtual

Congreso; YSI Virtual Plenary; 2020

Young Scholars Initiative (YSI)

The Argentinianeconomy is facing severe difficulties to achieve positive and consistenteconomics growth. In this context, a Keynesian programme would include anexpansionary fiscal policy, in order to foster aggregate demand and thuseconomic activity. However, this policy has already shown several shortcomings,not related to the need of a balanced public budget but to the externalsustainability of the growth process. Given that economic activity requiresimports of inputs and capital goods, an increase on GDP due to an expansionaryfiscal policy implies a balance-of-payments deficit, eventually leading to a recessivedepreciation that reduces wages, aggregate demand, economic activity and,finally, imports, restoring balance.This projectaims to study in depth the link between economic growth, balance-of-paymentsand fiscal space, the latter being understood as the possibility ofimplementing expansionary fiscal policies without triggering a balance ofpayments crisis. This will imply both a historical analysis of the Argentinianeconomic structure (based on national input output matrices, but alsoconsidering income distribution and portfolio decisions by domestic agents) anda comparison with other developing countries. The ultimate goal is to define an?optimal? fiscal policy which, considering the constraints, can promoteeconomic growth.