Peru: Selected Issues Paper

January 29, 2014

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Format: Chicago

Peru: Selected Issues Paper, (USA: International Monetary Fund, 2014) accessed November 21, 2024

Summary

This Selected Issues paper assesses empirically the motives and effectiveness of foreign exchange (FX) interventions in Peru. The results of the study indicate asymmetries both in the Central Reserve Bank of Peru’s reaction function and in the effectiveness of FX interventions. Probit estimates of the likelihood of FX purchases and sales, in the first stage of the regression, show that both forms of intervention are targeted at leaning against the wind; that is, resisting appreciation in the former case and resisting depreciation in the latter. But only FX sales, not FX purchases, react to volatility. Similarly, instrumental variable regression results show evidence of asymmetry in the effectiveness of FX interventions.

Subject: Balance of payments, Capital flows, Environment, Exchange rates, Fiscal governance, Fiscal policy, Foreign exchange, Natural resources

Keywords: Capital flows, CR, Economic activity, Exchange rates, Fiscal governance, FX intervention, FX purchase, Global, Investment growth, Investment slowdown, Investment theory, ISCR, Natural resources, Net resource wealth, Peru, Real GDP, Resource revenue, Revenue, U.S. dollar

Publication Details

Pages:

69
Volume:

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DOI:

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Issue:

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Series:

Country Report No. 2014/022
Stock No:

1PEREA2014002
ISBN:

9781475563580
ISSN:

1934-7685

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