Determinants of Venezuelaâ€™s Equilibrium Real Exchange Rate
The Venezuelan Bolivar is pegged to the U.S. dollar and supported by foreign exchange restrictions. To assess the appropriateness of the peg during the current period of high oil export earnings and the likely consequences of a liberalization, this paper attempts to disentangle the effects of oil prices from other factors underlying the equilibrium real exchange rate, and examines the role of foreign exchange controls by extending the application of a vector error correction (VEC) model to parallel market exchange rates. Several findings are worth noting. First, oil prices have indeed played a significant role in determining a time-varying equilibrium real exchange rate path. Second, oil prices are not the only important determinant of the real effective exchange rate: declining productivity is also a key factor. Third, appreciation pressures are rising. Finally, the speed of convergence of a VEC model using parallel rather than official rates is higher, suggesting that the government has been able to maintain sharp deviations between the official and equilibrium rates because of Venezuela's oil dependency and the concentration of oil income in government hands.
|Date of creation:||01 Mar 2006|
|Contact details of provider:|| Postal: International Monetary Fund, Washington, DC USA|
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
|Order Information:||Web: http://www.imf.org/external/pubs/pubs/ord_info.htm|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paruolo, Paolo, 2002.
"Asymptotic Inference On The Moving Average Impact Matrix In Cointegrated I (2) Var Systems,"
Cambridge University Press, vol. 18(03), pages 673-690, June.
- Paruolo, Paolo, 1997. "Asymptotic Inference on the Moving Average Impact Matrix in Cointegrated 1(1) VAR Systems," Econometric Theory, Cambridge University Press, vol. 13(01), pages 79-118, February.
- Ratna Sahay & Luis Felipe CÃ©spedes & Paul Cashin, 2002. "Keynes, Cocoa, and Copper; In Search of Commodity Currencies," IMF Working Papers 02/223, .
- Ronald Macdonald & Luca Antonio Ricci, 2004.
"Estimation Of The Equilibrium Real Exchange Rate For South Africa,"
South African Journal of Economics,
Economic Society of South Africa, vol. 72(2), pages 282-304, 06.
- Ronald MacDonald & Luca A Ricci, 2003. "Estimation of the Equilibrium Real Exchange Rate for South Africa," IMF Working Papers 03/44, .
When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:06/74. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow)or (Hassan Zaidi)
If references are entirely missing, you can add them using this form.