Argentina's growth experience during the last decade and the 1990s

The 1980s have been dubbed the “lost decade” in Latin America because during those harsh ten years GDP per capita declined in that region at an average annual rate of 1.5%, in contrast with the 2.3% and 1.8% increases of the immediately preceding and immediately following decades, respectively. Chart 1 shows not only that Argentina did not escape that general trend, but also that the decline had started much earlier, in the mid 1970s. If the size of a downturn is measured as the percentage change from the highest GDP per capita after the last time that variable was below trend to the lowest GDP per capita before the first time that variable was above trend again, then the 1974-90 decline was not only rather pronounced, about 20%, but also the longest in Argentina’s recorded history. It is true that the decline from 1974 to 1979 could be dismissed as a simple “reversion to the mean” phenomenon. But this observation does not take away the fact that per capita GDP was still 20% below trend in 1990. Not even during the worse years of the Great Depression had Argentina experienced such a large decline relative to trend. Should this lost decade decline be regarded as a “depression” or simply as a “long and severe recession”? The paper will not attempt to resolve this issue. Rather, its goal is the more modest one of presenting the evidence for Argentina’s lost decade within the neoclassical growth model framework, in the hope to sort out the anomalies and regularities that future research will need to address in the process of answering that question. Departamento de Economía