Financial crises and reserve management in Peru

This document analyzes economic policy responses to two episodes of sudden reversal of capital flows in the Peruvian economy: the 1998 Russian crisis and the current global economic crisis. The analysis indicates that in both cases, the Peruvian economy managed to mitigate the impact of these shocks thanks to an appropriate policy for controlling systemic risks. In particular, during the expansionary phases of the economic cycle, a preventive policy of accumulating international reserves was implemented through high foreign currency reserve requirements on bank deposits and liabilities, a sound fiscal position, and occasional intervention in the foreign exchange market. Subsequently, during episodes of capital outflows, the partial drawdown of accumulated reserves helped offset this reduction in international financial flows and mitigate its impact on growth. (Audio: Department of Economic Publications)