Oil Wealth and Economic Behavior: Case of Venezuela 1966-1981

International Monetary Fund

No 1988/056, IMF Working Papers from International Monetary Fund

Abstract: A short-run macroeconomic model is estimated for Venezuela, in order to examine the hypothesis that the availability of oil resources may entail a confidence effect—on perceived future incomes—that influences the expenditure and portfolio behavior of economic agents. Such confidence effect is found to be empirically significant. Model simulations reveal that the impact of oil price changes on the level and variability of money demand, balance of payments and inflation are significantly more pronounced in the presence of the confidence effect than in its absence. This has significant implictions for the size and structure of the needed policy interventions.

Keywords: WP; balance of payments; interest rate; excess demand; monetary policy; price shock; wealth effect; simulation result; private sector; confidence effect; exchange rate; estimation result; shock result; inflation rate; money demand; natural resource; Oil prices; Oil; Income; gas and mining taxes (search for similar items in EconPapers)
Pages: 60
Date: 1988-01-01
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