Inflation in Argentina was 54 percent in 2019, before falling to 42 percent in 2020. Despite Argentina's fluctuating economic instability over the twentieth century, the largest factor in its current economic status is the legacy of poor fiscal discipline left by the economic depression from 1998 to 2002. Although data is not available from 2014 to 2016, Argentina's inflation rate has been among the highest in the world for the past five years.
What causes inflation?
Inflation is a rise in price levels for all goods. Major causes of inflation include an increase in money supply, low central bank interest rates, and expectation of inflation. In a country such as Argentina, the expectation can be one of the biggest obstacles. People expect inflation to be high and demand increasing wages, and firms continue raising prices because they expect the costs of inputs to increase. Banks follow suit, charging high interest rates on fixed deposits.
Effects of inflation
Inflation negatively affects savers. 100 Argentinian pesos in 2018 was worth just under 75 pesos in 2019, after adjusting for the 34 percent inflation rate. Similarly, frequently changing prices has its own inherent cost, called “menu cost” after the price of printing new menus. Inflation will also have a positive effect on national debt when that debt is denominated in Argentinian pesos, because the pesos will be cheaper when the loan matures. However, the majority of Argentina’s debts are in foreign currency, which means that inflation will make these debts larger in peso terms.
Argentina: Inflation rate from 2004 to 2029
(compared to the previous year)
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IMF. (October 22, 2024). Argentina: Inflation rate from 2004 to 2029 (compared to the previous year) [Graph]. In Statista. Retrieved December 22, 2024, from https://www.statista.com/statistics/316750/inflation-rate-in-argentina/
IMF. "Argentina: Inflation rate from 2004 to 2029 (compared to the previous year)." Chart. October 22, 2024. Statista. Accessed December 22, 2024. https://www.statista.com/statistics/316750/inflation-rate-in-argentina/
IMF. (2024). Argentina: Inflation rate from 2004 to 2029 (compared to the previous year). Statista. Statista Inc.. Accessed: December 22, 2024. https://www.statista.com/statistics/316750/inflation-rate-in-argentina/
IMF. "Argentina: Inflation Rate from 2004 to 2029 (Compared to The Previous Year)." Statista, Statista Inc., 22 Oct 2024, https://www.statista.com/statistics/316750/inflation-rate-in-argentina/
IMF, Argentina: Inflation rate from 2004 to 2029 (compared to the previous year) Statista, https://www.statista.com/statistics/316750/inflation-rate-in-argentina/ (last visited December 22, 2024)
Argentina: Inflation rate from 2004 to 2029 (compared to the previous year) [Graph], IMF, October 22, 2024. [Online]. Available: https://www.statista.com/statistics/316750/inflation-rate-in-argentina/