Central-Bank 'Distress' and Hyperinflation in Argentina, 1989-90

Bibliographic Data

ID5140249
AuthorsPaul Beckerman (World Bank, corresponding author)
Year1995
Volume27
Issue3
Pages663-682
Publication date1995-10-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueJournal of Latin American Studies (JOURNAL)
Journal identifiersISSN: 0022-216X • E-ISSN: 1469-767X
PublisherCambridge University Press (CUP) (PUBLISHER)
DOI10.1017/s0022216x00011640
OpenAlexW2165125190
LanguageEN
Citations received5
References cited5

The essential explanation of Argentina's 1989 hyperinflations is that the stabilisation programmes immediately preceding them drove the public sector in particular, the central bank - into 'debt distress.' These stabilisation programmes sought to anchor prices on an appreciated exchange rate, sustained by tight monetary policies that maintained high interest rates. The problem was that the government and the central bank had heavy domestic-debt burdens, and their combined interest bill far exceeded their non-interest surplus. To finance the interest without creating money, the government and central bank had to add continually to the outstanding debt stock as they capitalised the interest due. The debt swelled, and interest rates were pressured upward. Heavy pressure against the exchange rate, devaluation and hyperinflation then ensued when the public-sector debt stock exceeded what financial markets could be persuaded to hold at reasonable interest rates

Debt · Devaluation · Economic policy · Economics · Exchange rate · External debt · Financial system · Government Debt · Hyperinflation · Interest rate · Monetary economics · Monetary policy · Stock (firearms) · Economic Theory and Policy · Finance

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