Dynamical macroprudential stress testing using network theory

The increasing frequency and scope of financial crises have made global financial stability one of the major concerns of economic policy and decision makers. This has led to the understanding that financial and banking supervision has to be thought of as a systemic task, focusing on the interdependent relations among the institutions. Using network theory, we develop a dynamic model that uses a bipartite network of banks and their assets to analyze the system’s sensitivity to external shocks in individual asset classes and to evaluate the presence of features underlying the system that could lead to contagion. As a case study, we apply the model to stress test the Venezuelan banking system from 1998 to 2013. The introduced model was able to capture monthly changes in the structure of the system and the sensitivity of bank portfolios to different external shock scenarios and to identify systemic vulnerabilities and their time evolution. The model provides new tools for policy makers and supervision agencies to use for macroprudential dynamical stress testing.     

Positive asymmetric information in volatile environments: The black market dollar and sovereign bond yields in Venezuela

PurposeWe test the informational efficiency of Venezuelan USD sovereign bond yields when the black market exchange-rate premium (BMERP) changes.DesignWe use a non-parametric, asymmetric, Granger causality test to test our hypothesis.FindingsWe find that the bond market with less than or equal to 5 years of maturity seems to be efficient when good news is released on the BMERP. However, this market is not informationally efficient, and when combined with unbiased bad news regarding the BMERP, arbitrage opportunities are created.Originality/valueCapital controls that restrict free exchange-rate mechanisms create arbitrage opportunities with negative news as opposed to positive news.     

中国与委内瑞拉石油资源合作开发形势分析

随着我国石油供需矛盾的逐步加剧,寻求海外石油资源已迫在眉睫。委内瑞拉当前成为世界第一石油资源大国,尤其是委内瑞拉重油资源开发尚处于初期阶段,从委内瑞拉新世纪以来的外交政策来看,中国与委内瑞拉石油开发合作前景良好,但同时中委合作也可能存在一定的潜在障碍。如今受到委美关系、委国内政策多变,税赋较重,及石油品质等方面的不利影响。     

How can a strong currency or drop in oil prices raise inflation and the black-market premium?

Based on the case of Venezuela, an oil exporter with a multiple exchange rate regime, this paper explains two counterintuitive phenomena. First, a fall in oil revenue can drive a steep rise in inflation by reducing foreign exchange for imports and raising the fiscal deficit financed by money growth. Second, when foreign exchange is rationed, a devaluation of the official exchange rate could produce a transitory fall in inflation by reducing the fiscal deficit and subsidies for buying foreign exchange. The paper also shows that the black market exchange rate can be rising far faster than overall inflation if it is driven by prices in the most distorted goods markets. The channels emphasized in this paper for determining inflation and the black market exchange rate are novel in the literature and may provide avenues of future research on commodity exporters and foreign exchange constraints.     

Expropriation risk and housing prices: Evidence from an emerging market

This paper examines the microeconomic determinants of residential real estate prices in Caracas, Venezuela, using a private database containing 17,526 transactions from 2008 to 2009. The particular institutional characteristics of many countries in Latin America, and Venezuela in particular, where land invasions and expropriations (with only partial compensation) have been common threats to property owners, provide us with an opportunity to test the effects of these risks on housing prices using a unique database. The effect of these risks on property prices is negative and significant. To our knowledge, this is the first attempt to quantify these impacts in the Hedonic pricing literature applied to real estate. Size, the number of parking spaces, the age of the property, the incidence of crime, and the average income in the neighborhood are significant determinants of prices. Finally, this paper analyzes the microeconomic determinants of housing prices at the municipal level.     

In search of stabilization and recovery: macro policy and reforms in Venezuela

Venezuela is currently immersed in a severe economic crisis as a result of years of domestic mismanagement and the recent reversal in oil prices. This article attempts to formulate a proposal for stabilization and recovery that includes upfront key policy actions to deal with the drastic foreign exchange constraint. We consider the recovery of foreign currency liquidity to be of paramount importance. This will allow not only the lifting of exchange control and the implementation of a stable and competitive real exchange rate, but also the removal of shortages across the board and output recovery. The recovery of domestic activity will also require supply-side relief in the form of broad deregulation, institutional changes, and a sensible policy to lift price controls. To maintain a stable and competitive exchange rate, we propose a whole set of policy measures for rapid suppression of inflation and the causal mechanisms that have formed over the years. A monetary reform and the support of monetary and fiscal policy for successful stabilization and recovery efforts are also discussed.     

Why Do Resource-Abundant Economies Grow More Slowly?

This article suggests an alternative explanation for why resource-rich economies have lower growth rates: because they are likely to be living beyond their means. It is shown that overshooting the steady state's equilibrium consumption and investment can be optimal in a Ramsey growth model with natural resources. Therefore, the economy will converge to its steady state from above, displaying negative growth rates on the transition. A dynamic general equilibrium model is calibrated to the Venezuelan economy and shown to approximate the economy's performance over the oil boom years adequately.     

Post-capitalist Development in Latin America’s Left Turn: Beyond Peronism and the Magical State

The persistence of struggles by popular sectors in the context of the pink tide has generated ongoing debates about how to interpret the region’s left turn. For some, these movements are understood as forming part of a tense but ultimately productive relationship with left governments in the pursuit of post-neoliberal development. For others, it points to potentially irreconcilable political differences, and neoliberal continuities in pink tide governance. In this paper, I address these debates by presenting research on two social movements: Argentina’s recuperated enterprises and Venezuela’s popular economy. Using a Marxian-inspired, situated case study approach, I argue that these movements can be understood as ‘post-capitalist struggles’, that is, attempts to articulate new forms of democracy and cooperation that point beyond capitalism. As such, these movements push beyond the politics of Kirchnerismo and Chavismo that reproduce, albeit in new forms, the limitations to post-capitalist development associated with Peronism and the ‘magical state’. These movements therefore reveal both the region’s potential post-capitalist future, and the barriers that stand against it in the context of the region’s latest phase of development.