Currency substitution and inflation in peru

• Liliana Rojas-Suarez ^[1]
  1. [1] International Monetary Fund
• Localización: Revista de análisis económico, ISSN-e 0718-8870, ISSN 0716-5927, Vol. 7, Nº 1 (Editores Invitados: Guillermo Calvo y Carlos Vegh), 1992, págs. 153-176
• Idioma: español
• Enlaces
  • Texto completo
• Resumen

  • 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.