Venezuela's Macroeconomic Crisis: An Enduring Ordeal of Worsening Economy with Alarming Inflation

Code : ECC0058

Year :

Industry :Macroeconomic analysis

Region : Venezuela

Teaching Note: Available

Structured Assignment : Not Available

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Venezuela has experienced a worst economic nightmare since 2014 with the rapid erosion of economic stability and democratic credibility. Triggered by the downturn in global oil prices, Venezuelan inflation touched exorbitantly high levels of around 1600 percent. With barely 25 percent of the population able to maintain a regular diet, growing crime levels, and raging humanitarian crisis, the poverty rate has shot up to a whopping 82 percent, thus making the Venezuela’s economy the worst performing economy in the world in 2017. President Nicolas Maduro and his United Socialist Party of Venezuela held a firm grip on power, despite growing resistance from both within and outside the country. Worsening economic growth at -18.6 percent in 2016, massive price inflation, mounting foreign debt service obligations, the collapse of Venezuelan Bolivar to alarming levels, the steep fall in the productivity of the dominant public sector enterprises, unproductive large bureaucracy, shortage of essential goods and services, more particularly the food, has pushed Venezuela into a worst-ever macroeconomic crisis of the century.

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Pedagogical Objectives:

  • To know how misplaced policy priorities hamper macroeconomic stability of the country like Venezuela.
  • To understand the dimensions of a macroeconomic crisis and its aftermath.
  • To gain a clear understanding of the consequences of massive price inflation and the need for an effective monetary policy for prudent inflation management..
  • To understand the implications of the economic mismanagement of foreign exchange reserve management and the challenges faced by Venezuela in containing the collapse of its Bolivar.
  • To comprehend Venezuela’s potential foreign debt default and explore available policy options to emerge out of the crisis.
  • To gain knowledge about international oil price shocks and their impact on the oil exporting economies.

    Keywords :Macroeconomic crisis;Price inflation, hyperinflation;Currency depreciation;Money supply;Price control;Exchange rate;Unemployment;Food shortages;Fiscal deficit;Oil prices;Crowding out effect;Sovereign debt;Debt default;Foreign investment;Humanitarian Aid

    Contents :

    Introduction >>

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