View full metadata record

dc.titleCapital Flow Management Measures and Dollarization
dc.contributor.authorAndreasen, Eugenia
dc.contributor.authorNuguer, Victoria
dc.contributor.orgunitDepartment of Research and Chief Economist
dc.coveragePeru
dc.date.available2020-12-03T00:00:00
dc.date.issue2020-12-03T00:00:00
dc.description.abstractThis paper studies from an empirical and theoretical perspective the systemic and bank-level effects of imposing reserve requirements (RR) in foreign currency in an economy with a heavily dollarized financial system. The paper empirically characterizes banks responses to the RR carried out by the Peruvian Central Bank since 2008 with the objective of stabilizing the financial market and meeting its policy targets. The results suggest that the RR is effective in reducing the overall level of credit in the economy and that banks response in terms of credit and deposits is very heterogeneous depending on their ex ante preference for foreign funding ratio, i.e., the ratio of deposits in dollars to total loans. Motivated by the empirical insights, the paper builds a DSGE small-open-economy model with financial frictions à la Gertler-Karadi-Kiyotaki, where bank heterogeneity and financial dollarization are introduced to evaluate the effectiveness of the differential RR in reducing financial dollarization and improving financial resilience.
dc.format.extent38
dc.identifier.doihttp://dx.doi.org/10.18235/0002905
dc.identifier.urlhttps://publications.iadb.org/publications/english/document/Capital-Flow-Management-Measures-and-Dollarization.pdf
dc.language.isoen
dc.mediumAdobe PDF
dc.publisherInter-American Development Bank
dc.subjectInflation Targeting
dc.subjectMonetary Policy
dc.subjectForeign Exchange
dc.subjectCapital Flow
dc.subjectFinancial System
dc.subjectCapital Control
dc.subject.jelcodeG21 - Banks • Depository Institutions • Micro Finance Institutions • Mortgages
dc.subject.jelcodeE58 - Central Banks and Their Policies
dc.subject.jelcodeE44 - Financial Markets and the Macroeconomy
dc.subject.jelcodeE65 - Studies of Particular Policy Episodes
dc.subject.keywordsMacroprudential policy;Currency risk;Reserve requirements;Emerging market economies
idb.identifier.pubnumberIDB-WP-01167
idb.operationRG-K1098
Return to Publication