NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Floating Exchange Rates in Peru, 1950-54

Richard K. Lyons

NBER Working Paper No. 3775*
Issued in July 1991
NBER Program(s):   ITI    IFM

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.

*Published: Journal of Development Economics, Vol. 36, No. 1, January 1992

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