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Inflation Targeting in Peru: The Reasons for the Success

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  • Oscar Dancourt

    (Department of Economics, Pontificia Universidad Católica del Perú, Av. Universitaria 1801, San Miguel, Lima 32, Perú)

Abstract

The Peruvian central bank took two major decisions in the early 2000s: implementing an inflation target system and accumulating sufficient foreign-exchange reserves. These two decisions have allowed the central bank to preserve macroeconomic stability in favorable or unfavorable international environments. The use and impact of the main monetary policy instruments over the period 2002–2013 is discussed, namely, the short-term interest rate set by the central bank or reference interest rate, the reserve requirement ratio in local and foreign currencies, and, finally, sterilized intervention in the foreign exchange market. The process of bank credit (de)dollarization is also reviewed.

Suggested Citation

  • Oscar Dancourt, 2015. "Inflation Targeting in Peru: The Reasons for the Success," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 57(3), pages 511-538, September.
    • Handle: RePEc:pal:compes:v:57:y:2015:i:3:p:511-538
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    Cited by:

    1. Josef C. Brada & Jan KubÃ­Ä ek & Ali M. Kutan & Vladimír Tomšík, 2015. "Inflation Targeting: Insights from Behavioral Economics," Eastern European Economics, Taylor & Francis Journals, vol. 53(5), pages 357-376, September.
    2. Pozo, Jorge, 2024. "Excessive bank risk-taking in an infinite horizon economy," Journal of Financial Stability, Elsevier, vol. 73(C).
    3. Rapetti, Martin & Libman, Emiliano & Carrera, Gonzalo, 2024. "Latin America in the New Millennium: A Region of Macroeconomic Forking Paths," MPRA Paper 122482, University Library of Munich, Germany.
    4. Castellares, Renzo & Toma, Hiroshi, 2020. "Effects of a mandatory local currency pricing law on the exchange rate pass-through," Journal of International Money and Finance, Elsevier, vol. 106(C).
    5. Syed Jaffar Abbas & Noman Arshed, 2023. "Examining Determinants of Regional Inflation Heterogeneity — A Robust Panel Data Analysis," SAGE Open, , vol. 13(4), pages 21582440231, December.
    6. Jhonatan Portilla & Gabriel Rodríguez & Paul Castillo B., 2022. "Evolution of Monetary Policy in Peru: An Empirical Application Using a Mixture Innovation TVP-VAR-SV Model [Metas de Inflación en Una Economía Dolarizada: La Experencia Del Perú]," CESifo Economic Studies, CESifo Group, vol. 68(1), pages 98-126.
    7. repec:udc:esteco:v:44:y:2017:i:2:p:97-124 is not listed on IDEAS
    8. Esther Barros-Campello & Carlos Pateiro-Rodríguez & J. Venancio Salcines-Cristal & Carlos Pateiro-López, 2017. "El esquema de objetivos de inflación: Evidencia para América Latina (1999-2015)," Estudios de Economia, University of Chile, Department of Economics, vol. 44(2 Year 20), pages 223-250, December.
    9. Pozo, Jorge, 2019. "Capital Flows and Bank Risk-Taking," Working Papers 2019-017, Banco Central de Reserva del Perú.
    10. Libman, Emiliano, 2018. "Asymmetric monetary and exchange-rate policies in Latin American countries that use inflation targeting," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.

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