This work examines the difficulties and formidable challenges faced by monetary authorities to control the behavior of monetary aggregates in an open economy dependent of an exportable natural resource such as Venezuela. The work not only introduces analytical arguments but also provides some empirical evidence that shows the several sources of endogeneity in the monetary base, the multiplier and other wider monetary aggregates in Venezuela. Though the Central Bank currently does not announce a clear strategy and target for the practice of monetary policy, we argue that the monetary authority has recently moved towards a strategy of targeting short-term interest rates. Presumably, the use of the repo rate as a monetary policy instrument is tied to a final target of economic activity.
Monetary policy; Venezuela; Monetary base; Endogenous money
