Exchange Controls and Macroeconomic Instability: Lessons from Argentina

This paper examines the macroeconomic effects of exchange controls in Argentina between 2003 and 2023, combining a historical-institutional perspective with a structural vector autoregression (SVAR) identified through sign restrictions. The analysis integrates the monetary trilemma, Austrian business cycle theory, and institutional economics to explain how persistent exchange restrictions exacerbated macroeconomic distortions, reduced investment, and undermined credibility. Empirical results indicate that controls provide short-term stabilization at the expense of long-term instability, thereby fueling inflationary pressures, currency misalignments, and recurring balance-of-payments crises. By reconstructing three distinct exchange-control regimes, the study underscores the institutional fragility that hinders sustainable monetary governance. The findings contribute to the comparative literature on financial repression, offering lessons for emerging economies facing similar constraints. Unlike previous studies, this paper combines a structural VAR approach with an institutional narrative, offering a novel lens on the persistence of exchange controls.