Letter of support for the new central bank law in Argentina

The prevailing ideology over the last thirty years has been that the only legitimate task of central banks everywhere is control of inflation. This has frequently been through the application of an "inflation target", a maximum rate of increase of some measure of aggregate price changes. The practical consequence of setting the "fight against inflation" as the primary objective has been to reduce substantially the policy options of central banks. Even more, this narrow approach prevents the coordination of monetary policy and fiscal policy, essential to successful countercyclical interventions.

In Argentina in the 1990s economic policy operated under the burden of an extreme form of this narrow approach, a "currency board" regime, involving a fixed exchange rate to the dollar and a monetary base strictly linked to foreign exchange reserves. During 1997-2002 the weaknesses inherent in this monetary policy created disaster, economic collapse and high inflation.

In March of this year, the Argentine government proposed a new central bank mandate, that would repeal the currency board rules and broaden the institution's mandate to multiple objectives including growth, more equitable distribution, sectoral credit allocation, and price stability. The Congress passed and President Cristina Fernandez signed it into law the new mandate.

We, economists working in the United Kingdom, applaud the Argentine government and the Congress for this farsighted approach to monetary policy. The new mandate allows the current and future governments to choose between wise and foolish economic policies, while the previous law institutionalized the latter.

George Irvin
Costas Lapavitsas
Terry McKinley
Jan Toporowski
John Weeks
(SOAS, University of London)

Ann Pettifor
(Prime Economics)

G. C. Harcourt
Ha-Joon Chang
Gabriel Palma
(Cambridge University)

Malcolm Sawyer
Gary Dymski
Annina Kaltenbrunner
(University of Leeds)

Guy Standing
(University of Bath)

Engelbert Stockhammer
(University of Kingston)

Ozlem Onaran
(University of Westminster)

John Grahl
(University of Middlesex)

Sarah Bracking
(University of Manchester)

Kalim Siddiqui
(University of Huddersfield)

Hulya Dagdeviren
(University of Hertfordshire)

Michael Burke
(Socialist Economic Bulletin)

Published in Spanish in Página/12 (thanks to John Weeks for providing the original English version)