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Floating Exchange Rates in Peru, 1950-54

Richard Lyons ()

No 3775, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: I test three potentially complementary models in an effort to capture the fundamentals that underlaid the market's determination of Peru's floating exchange rate through the period 1950-54: the first is an expectational purchasing power parity (PPP) model which maintains that asset market forces were driving the exchange rate to its perceived PPP level; the second is a flexible-price monetary model; and the third is a model along the lines described by Tsiang (1957) which emphasizes world prices for Peruvian exports as a fundamental determinant. I find that the expectational PPP model not only dominates the others, but also fits quite well.

Date: 1991-07
Note: ITI IFM
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Published as Journal of Development Economics, Vol. 36, No. 1, January 1992

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