Empirical Evidence on Fiscal Policy Sustainability in Argentina

This paper contributes to the study of the economic history of Argentine crises by analyzing the fiscal sustainability for the period 1865-2002. Fiscal deficits are sustainable if the current market value of debt equals the discounted sum of expected future surpluses. It is found that Argentina never had ‘strong’ fiscal sustainability. At most, it reached weak sustainability for some sub-periods and no sustainability at all during the sub-period, 1950-1989. Interestingly, sustainability got worse as the economy went from mostly open to relatively closed state.