Inflation Expectations and Dollarization in Peru
By Fernando Pérez Forero ; Zenón Quispe ; Renzo Rossini ; Marco Vega
June 2016
Language: Spanish
JEL Classification
- E52
- E58
- F31
Abstract
The pass-through of the exchange rate to domestic prices in dollarization scenarios poses greater challenges for monetary policy. Moreover, these challenges intensify when real transactions are dollarized, as this distorts the formation of inflation expectations by introducing asymmetries and nonlinearities in the relationship between the exchange rate and inflation during periods of sharp currency depreciation, as opposed to episodes of moderate depreciation and periods of appreciation.