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| dc.title | Venezuela's Lagged Price Adjustment: Inflationary Pass-through, Consumption and Distributional Impacts, and (Potential) Policy Implications |
| dc.contributor.author | Olivo, Víctor |
| dc.contributor.author | Saboin, José Luis |
| dc.contributor.orgunit | Country Department Andean Group |
| dc.coverage | Venezuela |
| dc.date.available | 2020-06-17T00:00:00 |
| dc.date.issue | 2020-06-17T00:00:00 |
| dc.description.abstract | This work seeks to estimate the impact of the adjustment in the prices of a series of goods and services that have been regulated for 20 years, something that implies high magnitudes. Using Input-Output and Social Accountability matrices, we find that the overall (direct and indirect) effect on the general price level of simultaneous price increases of 10% on fuel, telecommunications and public services could be around 0.67%, whereas a 10% devaluation entails a 2.83% impact. Comparing between lowest and highest income deciles, a simultaneous 10% increase in all the above-mentioned products plus wages and the exchange rate, implies a 5.58% increase in expenditures of the lowest income household (5.56% in the highest), whereas it represents 12.43% of its income (3.6% in the highest). The results from an econometric exercise for the prices of fuel, electricity and broadband controlling for domestic currency, overall liquidity, and direction of the adjustment, reveal pass-through of 0.62%, 0.71% and 0.32%, respectively for each 10% increase on these prices; mostly in line with the input-output matrix approach and still rather low. Thus, no matter how low the pass-through is, given the magnitude of the price adjustment (due to the lags), it has welfare and distributional effects. A strategy to mitigate such impact in the middle of a humanitarian crisis and in a sustainable way is evaluated according to different policy scenarios. Overall, the results from a financial program framework suggest that a gradual approach for adjusting fuel and regulated services prices, together with mitigating measures, although fiscally costlier (but certainly cheaper than the status-quo) may produce outcomes in terms of GDP growth and inflation that are better than those obtained with a strategy of upfront adjustment in prices without mitigating measures. |
| dc.format.extent | 48 |
| dc.identifier.doi | http://dx.doi.org/10.18235/0002440 |
| dc.identifier.url | https://publications.iadb.org/publications/english/document/Venezuelas-Lagged-Price-Adjustment-Inflationary-Pass-through-Consumption-and-Distributional-Impacts-and-Potential-Policy-Implications.pdf |
| dc.language.iso | en |
| dc.medium | Adobe PDF |
| dc.publisher | Inter-American Development Bank |
| dc.subject | Inflation |
| dc.subject | Electricity |
| dc.subject | Energy Subsidy |
| dc.subject | Broadband Service |
| dc.subject | Electricity Tariff |
| dc.subject | Gasoline |
| dc.subject | Fuel Price |
| dc.subject.jelcode | F31 - Foreign Exchange |
| dc.subject.jelcode | H23 - Externalities • Redistributive Effects • Environmental Taxes and Subsidies |
| dc.subject.jelcode | H24 - Personal Income and Other Nonbusiness Taxes and Subsidies |
| dc.subject.jelcode | E31 - Price Level • Inflation • Deflation |
| dc.subject.jelcode | J30 - Wages, Compensation, and Labor Costs: General |
| dc.subject.keywords | Venezuela;Pass-through;Input-Output Matrix;Price subsidies;Gasoline |
| dc.type | Discussion Papers |
| idb.identifier.pubnumber | IDB-DP-00783 |
| idb.operation | RG-T3253 |