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Title: Alternative monetary policies for commodity dependent developing countries : the myth of the exchange rate solution : a post-Keynesian analysis of the Peruvian economic structure (1991-2010)
Author: Ventimiglia di Monteforte, Luigi Maria Antonio
Awarding Body: SOAS, University of London
Current Institution: SOAS, University of London
Date of Award: 2012
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This thesis addresses the issue of how monetary policy may influence non-financial firms' investment behaviour in a commodity dependent developing country. The Peruvian experience over the last two decades is particularly interesting because of the non-conventional exchange rate intervention implemented by the Banco Central del Peru since the beginning of the 1990s. The thesis is organised in two parts. Part one critically reviews the evolution of the extensive theoretical literature on the 'commodity trap' since the Prebisch and Singer hypothesis. It compares and contrasts the developmental effectiveness of two monetary policies alternatives to inflation targeting, namely Peg-Export-Price (PEP) target and the Real-ExchangeRate (RER). It also shows how, however, these two alternative proposals overlook the issue of dollarisation. Second, part one also reviews the recent empirical literature on the financialisation of primary commodities and its effects on the cycle of commodity dependent developing countries. Part one concludes with sketching the theoretical framework of the thesis which relies on a Minskyian framework. Part two illustrates the empirical findings of the thesis relative to the current monetary policy and its effects on a sample of 117 Peruvian firms. It concludes that the RER solution is not effective and that the PEP solution is not applicable. Part two also demonstrates how the current monetary policy favours firms which are more dollar exposed, namely domestic conglomerates and multinational corporations. The thesis concludes that to escape the commodity trap, a change in the structure of the economy would be necessary; this would require a more active role of the central bank with respect to credit supply and in line with industrial policy. Nevertheless, the country's political economy conditions, such as the interests of the powerful conglomerates cannot be ignored.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral