Real Dollarization in Peru

Although financial dollarization has declined considerably (in the case of loans, from over 80 in 1990 to less than 30 in 2017), transaction dollarization remains high (around 60 percent). This poses significant challenges for monetary policy, particularly in scenarios of greater exchange rate volatility, which affect domestic inflation through pass-through to prices. This paper presents a measure of real dollarization at the sectoral level and at the level of the cost structure of non-financial firms, which is crucial for better understanding this phenomenon and contributing to the design of monetary policy in Peru.