Floating Exchange Rates in Peru, 1950-54 / Richard K. Lyons.

By:

Lyons, Richard K

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w3775.Publication details: Cambridge, Mass. National Bureau of Economic Research 1991.Description: 1 online resource: illustrations (black and white)Subject(s):

F31 - Foreign Exchange

Online resources:

Available additional physical forms:

Hardcopy version available to institutional subscribers

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.

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July 1991.

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.