Peru Exchange Rate

WP/12/166

Peru: Monetary and Exchange Rate Policies, 1930–1980

Gonzalo Pastor

© 2012 International Monetary Fund

WP/12/166

IMF Working Paper African Department Peru: Monetary and Exchange Rate Policies, 1930–1980 Prepared by Gonzalo Pastor1 Authorized for Distribution by Calvin McDonald June 2012 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. Abstract This paper reviews monetary and exchange rate policies in Peru in 1930-80. The review covers major transformations to the world economy, including the post-1929 crash and WWII, and changing economic paradigms, such as the collapse of the gold standard and the rise and fall of the Bretton Woods system of fixed exchange rates. The analysis emphasizes the lasting partnership between Peruvian policymakers and the Bretton Woods institutions, while stressing the local authorities’ ownership of final policy decisions. The review shows that, in general, during the fifty year period under analysis, the Peruvian authorities sought to deliver nominal exchange rate stability, even at the cost of introducing market distortions and/or incurring heavy losses in international reserves. JEL Classification Numbers: E5, F4, N1 Keywords: Peru monetary and exchange rate policies; Bretton Woods system; Polak model Author’s E-Mail Address:gpastor@imf.org

The author is most grateful to Shane Hunt for his challenging comments on this paper. Thanks are also due to Carlos Contreras, Javier Hamann, Alfonso Quiroz, Miguel Savastano, Jorge Vega, Richard Webb and the staff of the Economics Studies Department at the Central Reserve Bank of Peru (BCRP) for their suggestions on how to improve earlier versions of this paper. Jenny DiBiase’s and Karen...