Drivers of Peru's Equilibrium Real Exchange Rate: Is the Nuevo Sol a Commodity Currency?
IMF Working Papers, February 11, 2015
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- Drivers of Peru's Equilibrium Real Exchange Rate: Is the Nuevo Sol a Commodity Currency?
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Bibliographic details
- Authors: Melesse Tashu
- Published: February 11, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498302760.001
Objective and methodology
- Tests the hypothesis of ‘commodity currency’ for the nuevo sol.
- Identifies drivers of Peru’s equilibrium real exchange rate using a cointegration analysis.
Key findings
- 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.
- Peru’s equilibrium real exchange rate is found to be driven mostly by productivity and government consumption.
- Large profit repatriation and foreign exchange intervention have effectively insulated Peru’s real exchange rate from the impact of commodity price shocks.
Implications and interpretation
- Lack of statistical significance for export commodity prices implies limited pass-through from world commodity price movements to the real effective exchange rate.
- Policy actions (profit repatriation and foreign exchange intervention) are identified as effective channels that buffer domestic exchange rate dynamics from commodity shocks.
- Emphasis on productivity and government consumption as principal drivers points to domestic structural and fiscal factors shaping the equilibrium real exchange rate.
Publication metadata (selected)
- Pages: 28
- Volume: 2015
- Issue: 026
- Series: Working Paper No. 2015/026
- DOI: https://doi.org/10.5089/9781498302760.001
Source: Melesse Tashu, "Drivers of Peru's Equilibrium Real Exchange Rate: Is the Nuevo Sol a Commodity Currency?", IMF Working Papers 2015/026 (February 11, 2015).
Content in this bundle
- _wp1526 - Appendix Tables