Argentina's Economy
A Century of Inflation
How Argentina has suffered high inflation for most of the past century, including hyperinflation in 1989-90, why it recurs, and how people cope.
Argentina has one of the world’s worst inflation records.
History
- High inflation was common from the 1940s onwards.
- Hyperinflation hit in 1989-90, with annual inflation exceeding 3,000 percent in 1989.
- Inflation surged again in the 2010s and exceeded 200 percent in 2023.
Why it recurs
- Fiscal deficits financed by printing money: “fiscal dominance”.
- Weak central bank independence.
- Expectations: people expect inflation, so they raise prices and wages preemptively.
- Indexation spreads price rises.
Currency changes
Argentina changed its currency multiple times, removing zeros: the peso ley, peso argentino, austral (1985) and current peso (1992).
Coping
- Argentines save in dollars, often cash kept outside banks.
- Real estate is priced in dollars.
- People spend quickly.
Lesson
Chronic inflation stems from repeated fiscal problems; ending it requires credible fiscal and monetary change.
The dollar mattress
An Argentine family keeps its savings in US dollar notes at home, distrusting the peso and banks after decades of inflation and crises.
Thinking inflation is a one-time problem
Argentina has faced high inflation for most of a century.
Key takeaways
- Argentina has had high inflation for decades.
- Hyperinflation exceeded 3,000 percent in 1989.
- Deficits financed by money printing drive it.
- People save in dollars to cope.
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