Dollarization dynamics and de-dollarization policies in Peru

Abstract

This article studies the dynamics of dollarization in Peru and evaluates the de-dollarization policies aimed at reestablishing the main functions of the sol as a numerary for the registration of value, as an efficient channel for economic transactions, and as the most efficient vehicle for the transfer of value over time. Any change of monetary regime is costly since it involves the establishment of uses and customs in society about the new currency. The set of measures that Peru has been implementing are based on the principle of issuing a national currency that fully fulfills the money functions, in such a way that economic agents regain confidence in their currency. These measures include, in the first place, monetary stability through price stability and the creation of an interest rate reference curve for the development of financial markets in national currency. Second, measures were aimed at preserving financial stability by guaranteeing financial system liquidity through reserve requirements and sterilized exchange intervention that have sought to reduce the vulnerabilities associated with financial dollarization (currency mismatches and liquidity risks in foreign currency). Finally, coordination measures were established to expand the use of the sol, inducing economic agents the obligation to set prices in soles and de-dollarize credit, useful for modifying inertial behavior, such as setting dollar prices for durable consumption goods or the granting of loans in dollars to families with income in soles.

JEL classification: E31 ; E44 ; E58 ; N26