| By: |
Rossini, Renzo (Banco Central de Reserva del Perú);
Quispe, Zenón (Banco Central de Reserva del Perú);
Serrano, Enrique (Banco Central de Reserva del Perú) |
| Abstract: |
The unprecedented monetary expansion implemented by central banks in developed
economies during recent years has induced an extraordinary flow of funds to
emerging economies and supported high commodity prices. This has created
upward pressures on the value of local currencies and a further expansion of
available funds and lending. This situation gave rise to concerns about a
posible misalignment of the real exchange rate relative to its equilibrium
level, especially because it can be deemed a temporary response to the current
phase of the cycle in developed economies, but with a potentially lasting
negative impact on the tradable sector of the economy. In Peru, the response
to this situation has been an intensification of sterilized intervention in
the foreign exchange market and the use of reserve requirements on local banks
foreign currency liabilities, reinforcing macro-financial stability in an
economy with a partially dollarized financial system. Both instruments have
contributed significantly to reducing excessive exchange rate volatility,
building up an international reserve buffer, and ensuring a normal flow of
bank credit. |
| Keywords: |
Monetary policy, central banking, foreign exchange intervention, reserve requirements |
| JEL: |
E52 E58 F31 |
| Date: |
2013–12 |
| URL: |
http://d.repec.org/n?u=RePEc:rbp:wpaper:2013-016&r=ifn |