NPR recently ran a story (here) titled "As Inflation Soars, Venezuela's Leader Opts for Drastic Steps." Venezuela has had past historical episodes with inflation, particularly in the 1990's and the new outbreak caught my attention. Why the new outbreak? To provide some context for my explanation, here's some background.
The conventional explanation for problems in Venezuela's economy (here) invokes the petroleum and manufacturing sectors.
However, results from using the VEL20 model indicate that the best driver for controlling Inflation in Venezuela is Globalization (the KOF Index) and (from the graphic above) Globalization peaked around 2000 (right when inflation was at it's lowest). The peak in KOF was essentially a "Globalization Bubble" during the Chavez government (1998-2013).
Notes
The Systems Model for Inflation (F=GDP Deflator) with input from Globalization (G=KOF). The model provides both the best short-term and attractor path predictor for Inflation [426.1 < AIC = 453.1 < 477.1].
No comments:
Post a Comment