Distributive Conflict, High Inflation, and Stabilization Programs in a Small Open Economy Framework: The Case of Argentina in the 1980s

Abstract

The debates between demand-pull and cost-push theories of inflation have shaped stabilization programs since the 1923 German hyperinflation. This article combines elements from the modern revival of the Classical tradition of value and distribution and the Latin American Structuralist Approach to analyse the political economy behind Argentina´s high-inflation regime and stabilization policies from 1983 to 1989. Our main hypothesis is that exchange rate dynamics play a crucial role in stabilizing distributive configurations and price dynamics in a small open economy with conflicting claims. High external debt, persistent devaluation expectations, and exchange rate policies imposed by international creditors to safeguard the economy´s repayment capacity are identified as the primary causes behind the failure of stabilization attempts in Argentina during the late 1980s.