Inflation and the Black Market Exchange Rate in a Repressed Market: A Model of Venezuela
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Summary:
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.
Series:
Working Paper No. 2016/159
Subject:
Economic sectors Exchange rates Foreign exchange Imports Inflation Informal economy International trade Prices
English
Publication Date:
August 3, 2016
ISBN/ISSN:
9781475523201/1018-5941
Stock No:
WPIEA2016159
Pages:
52
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