Argentina's stabilization experience: Orthodoxy and the primavera plan; sustainability of the convertibility plan's fiscal policy

This dissertation assesses Argentina's recent stabilization programs. In particular, it analyzes the primavera plan put forward by the administration of President Alfonsin and the convertibility scheme implemented by the current government of President Menem.; For this purpose, two types of models are developed. First, a markup extension of the macro rational expectations model is built, estimated, and tested. Second, a set of generational accounts is constructed for Argentina. The resulting generational accounting framework is used to identify policies to achieve inter-temporal government budget balance, the fiscal role played by the country's recent privatization program, and the fiscal impact of Argentina's recent social security reform.; The first model concludes that structural factors played a minor part in price formation during the primavera plan. Accordingly, a stabilization attempt aimed only at controlling these factors, rather than dealing with the underlying cause of inflation--unsustainable fiscal and monetary policies--was doomed to fail. This was precisely what happened to the primavera plan.; Argentina's generational accounts indicate a huge inter-temporal imbalance which is robust to reasonable variation in assumptions and implies that the nation's current fiscal policy is unsustainable. Correcting this imbalance will require substantial cuts in government consumption and pension payments--cuts which are far beyond anything currently being debated. The crisis in Argentina's long-term fiscal finances documented in the generational accounting was exacerbated by its recent social security reform. As the dissertation makes clear, this reform constituted, to a large extent, simply a reclassification of government liabilities in which implicit government IOUs were made explicit; i.e., the reform did not fundamentally reduce the government's long-term expenditure commitments. Finally, the dissertation's generational accounting shows that the manner in which Argentine privatization receipts were spent dissipated a large amount of government net wealth and has significantly contributed to the country's long-term generational imbalance.