The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
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.