Monetary and Exchange Rate History of the Republic of Peru: An Overview

This article examines the implementation of monetary and exchange rate policy in Peru over the 200 years since the republic was founded (1821–2021). The historical review briefly describes policy achievements and the constraints on national monetary management (both before and after the establishment of the Central Bank in 1922) imposed by global economic and financial developments. Central to the historical analysis is the choice of exchange rate regime (fixed or floating exchange rate), which affected the Central Bank’s autonomy in implementing macroeconomic stabilization policies. Under a fixed exchange rate regime, the monetary authority lacked the autonomy to influence the domestic economic balance (growth and balance of payments), with its primary function reduced, in principle, to guaranteeing the supply of foreign currency at the official parity rate. Only under a floating exchange rate system was it possible to achieve an effective combination of autonomous monetary policy operating within a context of financial openness to the rest of the world. The institutional changes enshrined in the 1992 Organic Law of the Central Reserve Bank of Peru (BCRP) and the 1993 Constitution—which eliminated the possibility of monetizing the fiscal deficit—consolidated the independence of the monetary authority and put an end to the fiscal dominance over monetary management that had characterized most of the 20th century.