Sources of Macroeconomic Fluctuations in Venezuela

Published: 2021-06-29 07:00:52
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1. Introduction
Banco Central de Venezuela
Vicepresidencia de Estudios
Oficina de Investigaciones Economicas
Sources of Macroeconomic
Fluctuations in Venezuela
Adriana Arreaza
Miguel Dorta*
*. This paper benefited from the comments of the staff at Universidad Alberto
Hurtado, Santiago de Chile, where it was presented on seminar. We are thankful for
the valuable comments received at the IESA seminar by the staff professors. We are
also grateful to Eduardo Zambrano, Juan Nagel, Oswaldo Rodríguez, José Guerra,
Omar Bello, Osmel Mazano and José Gregorio Pineda for their valuable comments.
We also thank Susana Carpio for her competent assistantship.
The aim of this paper is to determine whether macroeconomic fluctuations in Venezuela
can be explained by oil income shocks or by domestic supply or demand shocks. We
conduct an empirical study based on the Blanchard and Quah method, using quarterly
data for the period 1984-2003. We find that domestic shocks seem to explain around
70% of non-oil output growth volatility. In particular, supply shocks seem to be the
main source of non-oil output growth volatility. Nominal shocks, on the other hand,
seem to account for over half of inflation variability. Domestic supply and demand
shocks may be policy related, but with the methodology used in this paper we cannot
determine whether these shocks are the outcome of weak institutions resulting from the
nature of a resource abundant economy, prone to external shocks and a rent-seeking
behavior. But taking such institutions as given, it seems the impact of oil income
fluctuations is limited, although not negligible. These findings are robust to different
El objetivo de este artículo es determinar las fluctuaciones macroeconómicas en
Venezuela puede ser explicada por choques de los ingresos petroleros o por choques
domésticos de oferta o de demanda. Se realiza para ello un análisis empírico basado en
la metodología de Blanchard y Quah, usando datos trimestrales para el período 1984-
2003. Los resultados indican que los choques domésticos explican al rededor de un 70%
de la volatilidad en el crecimiento del producto no petrolero. En particular, los choques

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