External Shocks and Inflationary Pressures in Argentina: A Post-Keynesian-Structuralist Empirical Approach

Abstract

We examine two external shocks that trigger inflationary pressures in Argentina. The first corresponds to a shock in international prices of agricultural commodities exported by this country. The second external shock affects the nominal exchange rate ($/U$S). Through the estimation of a quarterly VAR with directional quantiles model for the 2004–2019 period, we show how the pass-through from these external shocks to the inflation rate operates asymmetrically and mainly through increments in nominal wages. We estimate that an external shock in the international agricultural commodities prices exported by Argentina engenders a pass-through of 10 per cent, vis-à-vis a shock in the nominal exchange rate with a pass-through of 25 per cent. We explain these results highlighting the relevance of the class struggle as a key inflationary transmission mechanism, in line with Post-Keynesian-Structuralist conflicting claims models of inflation. These empirical results pose significant challenges for economic policy design, particularly pondering the adoption of measures that aim to decouple the potentially disruptive effects of these external shocks on inflationary pressures in Argentina.