Date of Thesis

Spring 2026

Description

This thesis will evaluate the causes of Argentina’s 2018 financial crisis, examining how it should be evaluated through the lens of fiscal imbalance or by external constraints. The dominant interpretation is shown in the International Monetary Fund’s (IMF) 2018 Standby Agreement. It attributed the crisis to excessive fiscal deficits, inflation, and weak monetary discipline. This perspective is supported by the Polak model. The model itself connects domestic credit expansion to balance of payment imbalances. It views external crises resulting from internal policy excess.

This paper offers an alternative interpretation of a post-Keynesian that emphasizes external vulnerability, foreign currency debt, and volatility of capital flows. An analysis of Argentina’s cycles of indebtedness shows that the country's periods of stability have been dependent on capital, which then create structural fragility. The cycles can be described as a short relief from external constraints which are then followed by crisis.

By analyzing the IMF framework, it became clear that balance of payment dynamics is influenced by capital flows instead of trade imbalances alone. Once global conditions worsen, inflows can reverse, lead to a currency depreciation, and then a balance of payment crisis. The results of the paper suggest that fiscal imbalance isn’t the primary cause of the crisis but an outcome of the worsening external conditions. Thus, it is believed that the IMF’s response was incomplete. This thesis then concludes that Argentina's 2018 crisis should be understood as an externally constrained crisis. This emphasizes the limitations of the conventional framework used in analyzing the crisis in the country.

Keywords

IMF conditionality, Polak model, Post-Keynesian economics, exchange rate dynamics, financial globalization

Access Type

Honors Thesis

Degree Type

Bachelor of Arts

Major

Economics

First Advisor

Matias Vernengo

Second Advisor

Ozlem Omer Cender

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