Inflation and Growth Dynamics: Understanding Venezuela‘s Economic Collapse

This thesis investigates the relationship between inflation and economic growth in Venezuela using a non-linear threshold regression model. While the long-run model (1980–2025) identifies a structural break at a 10% inflation rate, the short-run model (1998–2025), encompassing the populist regimes of Chávez and Maduro that led the country into a severe hyperinflation crisis, reveals a shifted threshold of 28%. However, the total effect of inflation on economic growth beyond these thresholds lacked strict statistical significance, most likely due to the country's extreme macroeconomic volatility. Furthermore, the study evaluates the impact of structural and external factors, confirming that global oil prices and mass emigration shaped growth dynamics, especially in the short term. The external shocks, in the form of U.S. sanctions, then only exacerbated the domestic macroeconomic mismanagement and together resulted in the ensuing unprecedented crisis.