Argentine federalism: economic crises, inflation, and central banks

What explains Argentina's transition from economic prosperity to entrenched inflation and financial crises? Written during but not focused on the reforms instituted by President Javier Milei, this chapter outlines the federal footprints of its dramatic predicament. It provides insights into the way that intergovernmental inducements have catalysed economic instability in Argentina. In contrast with mainstream accounts of endemic inflation, it develops a vertical-level explanation based on the effect of suboptimal territorial institutional design for fiscal and monetary policy. First, Argentina's centralised revenue-sharing system engenders some of the world's largest vertical fiscal imbalances. Second, the central bank's centralised structure precludes subnational representation, weakening provincial coordination with national monetary priorities. The chapter then examines Argentine political responses to economic crises and inflation. It shows that while the federal government has inconsistently resorted to orthodox procyclical and countercyclical policies, policy innovations at the subnational and local level have been encouraged.