Stabilising without breaking: lessons from six Latin American anti-inflation programmes

The difference between programmes that lasted and those that failed lies not in the speed of fiscal adjustment but in the sequencing of relative price reforms.

Argentine macroeconomics is usually debated in terms of speed — how fast to adjust, how fast to open, how fast to bring inflation down — and less often in terms of sequence and of the political sustainability of each decision. This work addresses the latter.

The central finding

The data indicate that stabilisation episodes that lasted were not the fastest, but those in which the correction of relative prices was distributed in an announced and verifiable way across several fiscal years.

The composition of adjustment matters as much as its size: cuts concentrated in public investment and in transfers to provinces show the highest reversal rates in the following cycle.

Policy implications

For economic policy this implies that predictability is not a secondary objective attained after stabilisation: it is a condition for stabilisation to hold.

“Credibility is not announced: it accumulates, and is lost all at once.”

Recommendations

1. 01Publish a multi-year path for regulated prices with independent technical review.
2. 02Protect public infrastructure investment through verifiable budget floor rules.
3. 03Improve the quality and frequency of consolidated fiscal information across the three levels of government.

Methodology

Estimates use household survey microdata and consolidated fiscal series. Robust standard errors are reported and methodological splices are documented in the annex.

This text is part of the institute's standing editorial line. Data and replication code, where applicable, are published in the Data section.