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Ms. Valerie Cerra
This paper presents a stylized general equilibrium model of the Venezuelan economy. The model explains how the recent sharp fall in oil revenue combines with foreign exchange rationing to produce a steep rise in inflation. Counterintuitively, a devaluation of the official exchange rate could temporarily reduce inflation. The model also explains how the hyper-depreciation of the black market exchange rate reflects prices in the most distorted goods markets.
Ms. Valerie Cerra

goods or the black market rate, but merely takes prices as given, as determined by the overall demand for goods in the retail market and dollars in the black market. For simplicity, I normalize the number of import and arbitrage firms to one representative firm in each market. Import firm The representative import firm buys (1- φ) Xt dollars from the central bank at the official rate st and buys φ Xt from the arbitrage firm at the black market rate bt. The dollars Xt can buy a maximum quantity Qt=Xt/P* of import goods at the international price P* and the firm