Effectiveness of Fiscal Stimulus and Tax Reform in Dealing with Inflation and Unemployment in Argentina in 2018-2023

Abstract

This study evaluates the effectiveness of fiscal stimulus and tax reform in addressing inflation and unemployment in Argentina from 2018-2023. In the context of Keynesian theory, which emphasizes the important role of fiscal policy in managing aggregate demand and stabilizing the economy, this study aims to examine the extent to which the Argentine government's measures have succeeded in achieving these macroeconomic goals. Using qualitative and quantitative analysis approaches. The data include macroeconomic data, government reports, case studies, and related literature. The fiscal stimulus implemented positively impacts reducing unemployment in the short term through increased public spending and infrastructure investment, which creates new jobs. However, this impact is often offset by increasing budget deficits and inflationary pressures due to increased aggregate demand. Tax reform aims to improve the efficiency and fairness of the tax system by reducing some types of taxes and simplifying tax rules, which helps encourage investment and economic growth. Referring to Keynesian theory, the study results show that fiscal stimulus has succeeded in increasing aggregate demand, reducing unemployment in the short term, and triggering inflation. Meanwhile, tax reform contributes to economic growth but is less effective in controlling inflation. This shows the need for a more balanced and coordinated policy to address inflation without hampering economic growth and job creation. Fiscal policy and tax reform must be designed more comprehensively by taking into account the structural factors that affect inflation to achieve optimal results.