The political economy of devaluation : the case of Peru, 1975 - 1978 / Jorge L. Daly.

This book assesses the impact of devaluation policies on the economies of developing countries by focusing on Peru's experience during the 1975-1978 period. The author first addresses the theoretical rationale of devaluation, incorporating discussion of the methodological foundations of the monetary approach to the balance of payments and its applicability to the Peruvian economy. He then demonstrates how the devaluation of the Peruvian sol caused a significant reduction in the rate of growth of the country's GDP and considerably altered the distribution of national income. The roots of Peru's economic crisis are also explored from a political economy perspective, and the actual roles played by monetarist stabilization policies in general and devaluation in particular are dealt with at length. Finally, using empirical simulations of alternative stabilization policies, the author demonstrates that Peru incurred unnecessary costs in its attempt to stabilize the economy.