ABSTRACT
In Chapter 9 Valdecantos discusses the new lost decade in the Argentinean economy. After the peak registered in 2011, the per capita GDP has oscillated with a decreasing trend, being 10% lower in 2019 than it was ten years before. In line with the literature describing the contractionary effect of devaluations (Díaz-Alejandro and Krugman and Taylor), this downward trend of income seems to have been driven by the exchange rate devaluations that took place in 2014, 2016, 2018 and 2019. In parallel, the rate of inflation exhibited an accelerating trend that could only be contained when the nominal exchange rate was kept under control. This weak macroeconomic performance coincided with two antagonistic approaches to the management of the financial account of the balance of payments. While the second presidency of Cristina Fernández de Kirchner (2012–2015) established strong regulations to cross-border capital flows (mainly on outflows), the administration of Mauricio Macri (2016–2019) pursued complete liberalization. In this chapter, the author tests whether an alternative approach to foreign financing, capital flow regulation and portfolio allocation would have generated a more stable macroeconomic environment. The author uses an empirical stock-flow consistent (SFC) model to harness its accounting consistency, dynamic framework and holistic description of the economy.
