Drivers of Peru's Equilibrium Real Exchange Rate: Is the Nuevo Sol a Commodity Currency?

February 11, 2015

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Format: Chicago

Melesse Tashu. Drivers of Peru's Equilibrium Real Exchange Rate: Is the Nuevo Sol a Commodity Currency?, (USA: International Monetary Fund, 2015) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper tests the hypothesis of ‘commodity currency’ on the nuevo sol and, more generally, identifies the drivers of Peru’s equilibrium real exchange rate using a cointegration analysis. The results show that export commodity prices do not have a statistically significant impact on Peru’s real effective exchange rate, suggesting that the nuevo sol is not a commodity currency. The paper provides empirical evidence that large profit repatriation and foreign exchange intervention have effectivelly insulated Peru’s real exchange rate from the impact of commodity price shocks. Peru’s equilibrium real exchange rate is found to be driven mostly by productivity and government consumption.

Subject: Commodities, Commodity prices, Currencies, Foreign exchange, Money, Prices, Real effective exchange rates, Real exchange rates

Keywords: Commodity currency, Commodity price, Commodity prices, Currencies, Exchange rate volatility, Export commodities for commodity, Export commodity, Export commodity price, Foreign exchange intervention, Global, Nuevo sol, Real effective exchange rates, Real exchange rate, Real exchange rates, World commodity price, WP

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/026
Stock No:

WPIEA2015026
ISBN:

9781498302760
ISSN:

1018-5941

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