Monetary Policy in a Dollarized Economy: the Case of Peru
Persistent high inflation in Peru during the 1970s led households to hold foreign currency as store of value. This process of dollarisation increased significantly during the hyperinflation of 1988-90. In the years that followed, a wide-ranging package of reforms in the financial system and in the conduct of monetary policy and fiscal policy were introduced to bring a halt to the hyperinflation. But despite nearly a decade of subsequent economic stabilisation, the decrease in dollarisation has been slow: by June 1999 two thirds of domestic banking deposits were still denominated in dollars, only ten percentage points below their level in 1991. How has dollarisation affected the efficacy of monetary policy in Peru? In theory, under dollarisation, revisions in expectations of devaluation can lead to instability of the domestic money demand, making monetary control more difficult. But instability in the demand for base money would seem to arise more from a dollarisation characterised by currency substitution (using dollars for transactions) than one characterised by asset substitution (using dollars as a store of wealth).
(This abstract was borrowed from another version of this item.)
Volume (Year): XIII (2000)
Issue (Month): 2 (July-December)
|Contact details of provider:|| Postal: Durango 54, Col. Roma, México D. F., 06700|
Phone: 52 (55) 5061 6680
Web page: http://www.cemla.org
More information through EDIRC
|Order Information:|| Web: http://www.cemla.org Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cushman, David O. & Zha, Tao, 1997.
"Identifying monetary policy in a small open economy under flexible exchange rates,"
Journal of Monetary Economics,
Elsevier, vol. 39(3), pages 433-448, August.
- David O. Cushman & Tao Zha, 1995. "Identifying monetary policy in a small open economy under flexible exchange rates," FRB Atlanta Working Paper 95-7, Federal Reserve Bank of Atlanta.
- Bernanke, Ben S. & Mihov, Ilian, 1997.
"What does the Bundesbank target?,"
European Economic Review,
Elsevier, vol. 41(6), pages 1025-1053, June.
- Andreas Beyer, 1998. "Modelling money demand in Germany," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(1), pages 57-76.
- George A. Akerlof, 1973. "The Demand for Money: A General-Equilibrium Inventory-Theoretic Approach," Review of Economic Studies, Oxford University Press, vol. 40(1), pages 115-130.
- Muscatelli, Vito Antonio & Spinelli, Franco, 1996. "Modeling Monetary Trends in Italy Using Historical Data: The Demand for Broad Money 1861-1990," Economic Inquiry, Western Economic Association International, vol. 34(3), pages 579-96, July.
- Jack Carr & Michael R. Darby, 1977.
"The Role of Money Supply Shocks in the Short-Run Demand for Money,"
UCLA Economics Working Papers
098, UCLA Department of Economics.
- Carr, Jack & Darby, Michael R., 1981. "The role of money supply shocks in the short-run demand for money," Journal of Monetary Economics, Elsevier, vol. 8(2), pages 183-199.
- Jack Carr & Michael R. Darby, 1980. "The Role of Money Supply Shocks in the Short-Run Demand for Money," NBER Working Papers 0524, National Bureau of Economic Research, Inc.
- Paul R. Krugman, 1991. "Target Zones and Exchange Rate Dynamics," The Quarterly Journal of Economics, Oxford University Press, vol. 106(3), pages 669-682.
- Martha Misas & Hugo Oliveros, . "Cointegración, exogeneidad y Crítica de Lucas: Funciones de Demanda de Dinero en Colombia: Un ejercicio más," Borradores de Economia 075, Banco de la Republica de Colombia.
- Jansen, Eilev S. & Teräsvirta, Timo, 1995.
"Testing Parameter Constancy and super Exogeneity in Econometric Equations,"
SSE/EFI Working Paper Series in Economics and Finance
53, Stockholm School of Economics.
- Jansen, Eilev S & Terasvirta, Timo, 1996. "Testing Parameter Constancy and Super Exogeneity in Econometric Equations," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(4), pages 735-63, November.
- H. Lütkepohl & T. Teräsvirta & J. Wolters, 1995.
"Investigating Stability and Linearity of a German M1 Money Demand Function,"
SFB 373 Discussion Papers
1995,57, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Lutkepohl, Helmut & Terasvirta, Timo & Wolters, Jurgen, 1999. "Investigating Stability and Linearity of a German M1 Money Demand Function," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(5), pages 511-25, Sept.-Oct.
- Lütkepohl, Helmut & Teräsvirta, Timo & Wolters, Jürgen, 1995. "Investigating Stability and Linearity of a German M1 Money Demand Function," SSE/EFI Working Paper Series in Economics and Finance 64, Stockholm School of Economics.
- Laidler, D., 1996.
"Notes on the Microfoundations of Monetary Economics,"
UWO Department of Economics Working Papers
9610, University of Western Ontario, Department of Economics.
- Laidler, David, 1997. "Notes on the Microfoundations of Monetary Economics," Economic Journal, Royal Economic Society, vol. 107(443), pages 1213-23, July.
- Lin, Chien-Fu Jeff & Terasvirta, Timo, 1994. "Testing the constancy of regression parameters against continuous structural change," Journal of Econometrics, Elsevier, vol. 62(2), pages 211-228, June.
- Sarno, Lucio, 1999. "Adjustment Costs and Nonlinear Dynamics in the Demand for Money: Italy, 1861-1991," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 4(2), pages 155-77, April.
- Cuthbertson, K, 1986. "Monetary Anticipations and the Demand for Money: Some UK Evidence," Bulletin of Economic Research, Wiley Blackwell, vol. 38(3), pages 257-70, September.
- Carr, Jack & Darby, Michael R. & Thornton, Daniel L., 1985. "Monetary anticipations and the demand for money: Reply to MacKinnon and Milbourne," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 251-257, September.
- Eric M. Leeper & Christopher A. Sims & Tao Zha, 1996. "What Does Monetary Policy Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 1-78.
- Eitrheim, Oyvind & Terasvirta, Timo, 1996.
"Testing the adequacy of smooth transition autoregressive models,"
Journal of Econometrics,
Elsevier, vol. 74(1), pages 59-75, September.
- Eitrheim, Øyvind & Teräsvirta, Timo, 1995. "Testing the Adequacy of Smooth Transition Autoregressive Models," SSE/EFI Working Paper Series in Economics and Finance 56, Stockholm School of Economics.
- George A. Akerlof, 1979. "Irving Fisher on his Head: The Consequences of Constant Threshold-Target Monitoring of Money Holdings," The Quarterly Journal of Economics, Oxford University Press, vol. 93(2), pages 169-187.
- Milbourne, Ross, 1983. "Optimal Money Holding under Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(3), pages 685-98, October.
- Laidler, David, 1984. "The 'Buffer Stock' Notion in Monetary Economics," Economic Journal, Royal Economic Society, vol. 94(376a), pages 17-34, Supplemen.
When requesting a correction, please mention this item's handle: RePEc:cml:moneya:v:xiii:y:2000:i:2:p:167-206. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ana Laura Sibaja-Jiménez)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.