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Rounding, money pieces per capita, psychological effects and monetary conversion in Venezuela

Author

Listed:
  • Ronald Balza Guanipa

    (Universidad Central de Venezuela, Universidad Católica Andrés Bello, Escuela de Economía.)

Abstract

This article discusses the arguments against three official arguments in favor of the monetary conversion that will be implemented in Venezuela starting January 2008. First, exact payments will not be facilitated by the availability of pieces of coins and bills of small denomination since exact payments depend on the quantity of pieces and not on their value. In the case that rounding becomes a problem, which has not been proved, it is a consequence of the inadequate proportion of money pieces issued by the Central Bank of Venezuela. Second, this paper assures that it will not be possible to reach the same quantity of money pieces per capita that the National Congress presented as a target, even less if the Central Bank of Venezuela continues printing money over a 30% growth rate when population growth rate is around 1.7%. Finally, the arguments presented in this work affirm that the psychological effects not only will be negative, but also that the lack of price nominal references might bring about violent conflicts among groups of consumers, speculators, producers, and so on.

Suggested Citation

  • Ronald Balza Guanipa, 2006. "Rounding, money pieces per capita, psychological effects and monetary conversion in Venezuela," Economía, Instituto de Investigaciones Económicas y Sociales (IIES). Facultad de Ciencias Económicas y Sociales. Universidad de Los Andes. Mérida, Venezuela, vol. 31(22), pages 9-39, january-d.
    • Handle: RePEc:ula:econom:v:31:y:2006:i:22:p:9-39
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    More about this item

    Keywords

    monetary conversion; rounding; bills per capita; euro illusion; conflicts.;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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