Inflation and the Black Market Exchange Rate in a Repressed Market : A Model of Venezuela

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Author/Editor: Valerie Cerra
Release Date: © August, 2016
ISBN : 978-1-47552-782-7
Stock #: WPIET2016159
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Description

This paper presents a stylized general equilibrium model of the Venezuelan economy. The model explains how the recent sharp fall in oil revenue combines with foreign exchange rationing to produce a steep rise in inflation. Counterintuitively, a devaluation of the official exchange rate could temporarily reduce inflation. The model also explains how the hyper-depreciation of the black market exchange rate reflects prices in the most distorted goods markets.




More publications in this series: Working Papers


More publications by: Valerie Cerra