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Real dollarization and monetary policy in Peru

Alex Contreras M., Zenon Quispe (), Fernando Alonso Regalado () and Martín Martinez
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Alex Contreras M.: BCRP, UDEP, UPC y UNI

Authors registered in the RePEc Author Service: Alex Alonso Contreras-Miranda

No 95, Working Papers from Peruvian Economic Association

Abstract: Despite the average inflation levels of 2.8 percent between 2002 and 2015, within the range of the price stability goal, partial dollarization remains as the main vulnerability of the Peruvian economy. Although financial dollarization has already been importantly reduced, in the case of lending, from 82 percent at the end of 1990’s to 29 percent in June 2016; the dollarization of transactions persists at high levels such as 58 percent imposing important challenges to monetary policy, principally in events of higher volatility of the exchange rate which passes-through to domestic inflation. In this scenario, measuring the real dollarization at the sectorial level and at the level of the structure of costs of non-financial firms becomes crucial to understand it and to contribute to the design of the monetary policy in the presence of dollarization.

Date: 2017-04
New Economics Papers: this item is included in nep-cba and nep-mon
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Handle: RePEc:apc:wpaper:2017-095