Global Policy Spillovers and Peru's Monetary Policy: Inflation Targeting, Foreign Exchange Intervention and Reserve Requirements
24 Pages Posted: 7 Oct 2014
Date Written: August 2014
This paper provides an overview of the monetary policy actions undertaken by the Central Reserve Bank of Peru, combining its main inflation targeting framework with sterilised FX interventions and reserve requirement measures in order to overcome the spillover effects of global policies to counter the recessionary implications of the global financial crisis. We provide a rationale for the use of these instruments, as well as empirical evidence on their effectiveness. In general, the results show that sterilised FX interventions and reserve requirement changes have the desired effects in limiting spillover effects and smoothing out the interest rate and credit dynamics in a dual monetary economy such as Peru.
Keywords: Non-conventional policy, inflation targeting, foreign exchange intervention, reserve requirements
JEL Classification: E 51, E52, E58, F31
Suggested Citation: Suggested Citation