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Macroprudential Policies in Peru: The effects of Dynamic Provisioning and Conditional Reserve Requirements

Elias Minaya and Miguel Cabello

No 675, BIS Working Papers from Bank for International Settlements

Abstract: Over the past decade, credit has grown significantly in Peru, a small and partially dollarised economy, and the mounting credit risk attached to foreign currency credit created severe challenges for financial regulators. This paper assesses the effectiveness of two macroprudential measures implemented by regulators: dynamic provisioning, to reduce the procyclicality of credit and conditional reserve requirements, to diminish the degree of dollarisation of the economy. Using credit register data that covers the period of 2004-2014, we find evidence that dynamic provisioning has decelerated the rapid growth of commercial bank lending. Moreover, mortgage dollarisation declined significantly after the implementation of the conditional reserve requirement scheme.

Keywords: reserve requirement; dynamic provisioning; credit supply; macroprudential policy; dollarisation (search for similar items in EconPapers)
JEL-codes: E51 E52 E58 G21 G28 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-rmg
Date: 2017-11
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