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In search of stabilization and recovery: macro policy and reforms in Venezuela

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  • Leonardo Vera

Abstract

Venezuela is currently immersed in a severe economic crisis as a result of years of domestic mismanagement and the recent reversal in oil prices. This article attempts to formulate a proposal for stabilization and recovery that includes upfront key policy actions to deal with the drastic foreign exchange constraint. We consider the recovery of foreign currency liquidity to be of paramount importance. This will allow not only the lifting of exchange control and the implementation of a stable and competitive real exchange rate, but also the removal of shortages across the board and output recovery. The recovery of domestic activity will also require supply-side relief in the form of broad deregulation, institutional changes, and a sensible policy to lift price controls. To maintain a stable and competitive exchange rate, we propose a whole set of policy measures for rapid suppression of inflation and the causal mechanisms that have formed over the years. A monetary reform and the support of monetary and fiscal policy for successful stabilization and recovery efforts are also discussed.

Suggested Citation

  • Leonardo Vera, 2017. "In search of stabilization and recovery: macro policy and reforms in Venezuela," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 40(1), pages 9-26, January.
    • Handle: RePEc:mes:postke:v:40:y:2017:i:1:p:9-26
    DOI: 10.1080/01603477.2016.1273069
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    References listed on IDEAS

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    1. Tamon Asonuma & Christoph Trebesch, 2016. "Sovereign Debt Restructurings: Preemptive Or Post-Default," Journal of the European Economic Association, European Economic Association, vol. 14(1), pages 175-214, February.
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    Cited by:

    1. Kulesza, Marta, 2017. "Inflation and hyperinflation in Venezuela (1970s-2016): A post-Keynesian interpretation," IPE Working Papers 93/2017, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    2. Guenette,Justin Damien, 2020. "Price Controls : Good Intentions, Bad Outcomes," Policy Research Working Paper Series 9212, The World Bank.
    3. Yagi, Michiyuki & Managi, Shunsuke, 2018. "Shadow price of patent stock as knowledge stock: Time and country heterogeneity," Economic Analysis and Policy, Elsevier, vol. 60(C), pages 43-61.

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