Propagation of Reserve Requirement Shocks to the Peruvian Banking System

We identify how reserve requirement shocks for domestic currency deposits affects the stock of lending of Banks at the aggregate and individual level. An expansionary reserve requirement shock has positive effects on aggregate credit granted in both domestic and foreign currency. These positive effects are also mildly observed in prices and output. In general, at the individual level, the effects in credit levels in both currencies follows the aggregate pattern but there is heterogeneity in the responses. In particular, the effect of a reserve requirement shock is stronger and quicker in small banks than in large banks.