Gold Standard in Theory and History by Eichengreen Barry; Flandreau Marc;

Author:Eichengreen, Barry; Flandreau, Marc;
Language: eng
Format: epub
Publisher: Taylor & Francis Group
Published: 2011-09-11T16:00:00+00:00

Table 9.1 Argentina 1900–14

After 1900 Argentina remained a member of the gold standard club until 1914, in these years experiencing considerable growth of production, population, railway length, exports and imports, within which context her successful gold standard adjustments must be studied. Export values, which expanded at an annual trend rate of 7.5 per cent (her export prices, it is important to note, rose at 3 per cent per annum), provided the main force promoting rising incomes and rising profitability of investment projects. After 1904 rising foreign investment and immigration were helpful not merely in bringing income increases as the funds were spent, but also in expanding the capacity of the economy to produce exportables. These movements are illustrated in table 9.1 where also the uneven response of total imports to these forces may be noted. However, if imports are split into consumption imports and investment imports (following the official subdivision), this may be explained by the resurgence of foreign borrowings. For, on the one hand, rising export proceeds brought rising incomes and hence rising consumption good imports, together with extra imports of investment goods if extra domestic investment was induced; on the other hand, the increased foreign-investment funds were partly spent directly abroad on investment goods; whilst the remainder was transferred to Argentina to finance local spending, thus increasing incomes and imports of consumption goods. The influence of this increased foreign investment after 1904 is most noticeable in the behaviour of imports expressed as a percentage of exports as depicted in figure 9.1. This ratio fell until 1903 as debt-service charges and profits remitted were claiming an extra share of export proceeds; thereafter the ratio increased until 1911 under the influence of rising foreign investment, declining after 1911 as foreign borrowings fell. When the ratios of consumption imports and investment imports as a percentage of exports are considered, it is noticeable how sharply the latter was affected by rising foreign investment, whilst the former was mildly affected, for foreign funds transferred to Argentina then were of relatively minor importance as a generator of incomes as compared with export proceeds.

The expansion of foreign-currency receipts, despite the increases in payments on account of growing import purchases and foreign debt-service payments, brought a net influx of gold into the economy in all years except 1914, which was either deposited in the Caja (or Conversion Bureau) in exchange for notes or added to the banking system’s reserves. International movements of gold thus enabled the note issue to expand at an annual trend rate of 8.8 per cent, whilst bank deposits rose both because of increases in cash reserves and because of declines in the cash/deposit ratios as the economy prospered. On the other hand, in the second half of 1913 and in 1914 when gold was exported on a considerable scale, the note circulation fell and likewise bank deposits, both because of falling cash reserves and because of rising cash/deposit ratios. Thus the monetary system served to intensify the influence of rising foreign-currency receipts

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