Currency Substitution and Inflation in Peru
Summary:
This paper shows that there is a long-run relationship between the expected rate of depreciation in the black-market-exchange rate and the ratio of domestic to foreign money in Peru; that is, the hypothesis of currency substitution can explain the behavior of real holdings of money in Peru. The paper also shows that, while the importance of currency substitution as a transmission mechanism through which domestic policies affected the dynamics of inflation was relatively small during a period of high but relatively stable inflation (January 1978-85), it became an important factor in the inflation process during the recent hyperinflation episode.
Series:
Working Paper No. 1992/033
Subject:
Bank deposits Dollarization Exchange rates Financial services Foreign exchange Government debt management Inflation Monetary policy Prices Public financial management (PFM)
English
Publication Date:
May 1, 1992
ISBN/ISSN:
9781451979206/1018-5941
Stock No:
WPIEA0331992
Pages:
46
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