Potential GDP Growth in Venezuela : A Structural Time Series Approach
Real GDP and oil prices are decomposed into common stochastic trend and cycle processes using structural time series models. Potential real GDP is represented by the level of the trend component of real GDP. The potential rate of growth of real GDP...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, D.C.
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2002/04/1769435/potential-gdp-growth-venezuela-structural-time-series-approach http://hdl.handle.net/10986/14807 |
| Summary: | Real GDP and oil prices are decomposed
into common stochastic trend and cycle processes using
structural time series models. Potential real GDP is
represented by the level of the trend component of real GDP.
The potential rate of growth of real GDP is represented by
the stochastic drift element of the trend component. Cuevas
finds that there is a strong association at the trend and
cycle frequencies between real GDP and the real price of
oil. This association is also robust in the presence of key
economic policy variables. From 1970-80, when the underlying
annual rate of increase of the real price of oil was 12
percent, the underlying annual rate of increase of potential
GDP in Venezuela was 2.6 percent. By contrast, from
1981-2000 when the underlying rate of increase of the real
price of oil was -5 percent, the underlying growth rate of
potential GDP fell 1.5 percent. However, the strength of
association between the underlying growth of oil prices and
real GDP has fallen considerably since the early 1980s,
suggesting that oil cannot be relied on as an engine for
future growth in Venezuela. |
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