Hyperinflation in Venezuela. An Analysis Based on Cagan's Conceptual Framework

Olivo, Victor (2023): Hyperinflation in Venezuela. An Analysis Based on Cagan's Conceptual Framework.

Abstract

The purpose of this work is to provide a detailed descriptive analysis of the hyperinflationary process that affected Venezuela between December 2017 and January 2020. The analysis is based on the approach of Cagan (1956) in the sense that it uses the criteria defined by Cagan to identify hyperinflationary episodes, and places special emphasis on the behavior of monetary factors (the supply of and demand for money) as the main direct determinants of hyperinflationary dynamics. Evidence is presented that the change in monetary dynamics through a jump in the rate of growth of the monetary base was a fundamental factor in the process of acceleration of the price level. The study also confirms that Cagan's condition of stability of the money demand was met during the hyperinflationary episode, and that the essential impulse of the hyperinflationary process was generated via expansion of the money supply and not an unstable behavior of the demand for money.

• Item Type: MPRA Paper
• Language: English
• Keywords: Hyperinflation, money supply, money demand, monetary base, fiscal deficit, monetary financing.
• Subjects: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E41 - Demand for Money; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply ; Credit ; Money Multipliers; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy ; Stabilization ; Treasury Policy

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