A Bumpy Road until Elections

ARGENTINA - Report 26 Sep 2014 by Esteban Fernández Medrano and Domingo Cavallo

The government is facing a complex economic moment. Privately measured activity indicators reflect that Argentina is once more suffering in its history of stagflation. Private consumption is affected by the decline in total wage income and uncertainty regarding key economic variables.

Despite the fact that the main underlying reason for the inflationary pressure is the monetization of the growing fiscal deficit, the government is trying to mitigate the recent consumption slump with anti-cyclical public spending policies. Such policies, plus the electoral spending pressures in 20...

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