Foreign exchange intervention in Peru: 2007 to 2013

The unprecedented monetary expansion implemented by central banks in developed economies during recent years has induced an extraordinary flow of funds to emerging economies and supported high commodity prices. This paper describes how the policy response implemented in Peru to face these capital flows was based on sterilized interventions in the foreign exchange market and the use of reserve requirements on local banks foreign currency liabilities. Both instruments have contributed significantly to reducing excess exchange rate volatility, building up an international reserve buffer, and ensuring a normal flow of bank credit. (Audio: Department of Economic Publications)