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Corresponding Author:
Ariel Dvoskin, Central Bank of Argentina and National Scientific and Technical Research Council, Argentina

Germán David Feldman, Central Bank of Argentina, Buenos Aires, Argentina
María Lorena Garegnani, Central Bank of Argentina and University of La Plata, Argentina

Distributive Effects of Balance-of-Payments Constraints: A Theoretical and Empirical Analysis of Argentina (2004-2022)

December 20, 2023
JEL classification: B51; C32; D33; F41
Keywords: Argentina; External Constraint; Income Distribution; Small Open Economy; Vector Error Correction Model


The paper studies the distributive effects of the external constraint in Argentina during the 2004-2022 period. We first develop a model inspired by the classical tradition - exogenous distribution - for a small (price taker) open economy with technical and financial dependencies under foreign exchange controls to examine the negative effects of exchange rate depreciations on real wage. Then, we use a Vector Error Correction Model (VECM): a) to show the long-run negative relationship between the real exchange rate and real wages in Argentina during the period under analysis; b) to identify the autonomous - or weakly exogenous - role played by the nominal exchange rate in the determination of income distribution; and, c) to capture the influence that, in the short-run, the financial exchange rate exerts on the official exchange rate.

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Institute for International Economics
of the Genoa Chamber of Commerce

Istituto di Economia Internazionale
Camera di Commercio di Genova
Via Garibaldi, 4 (III piano) - 16124 Genova (Italy)