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Inflation,Inflation Variability, and Output Performance. Venezuela 1951-2002

Olivo, Victor (2014): Inflation,Inflation Variability, and Output Performance. Venezuela 1951-2002.

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This paper explores the relationship between the level of inflation, inflation variability, and output performance in the Venezuelan economy for the period 1951-2002. The paper examines the mechanism through which higher inflation translates into lower non-oil real GDP growth. We find empirical evidence that supports Friedman's (1977) contention that higher inflation produces more inflation volatility /uncertainty that leads to relative price variability that in turn, is harmful for the proper functioning of the market as the best system for allocating resources.

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