Managing credit in dollarised economies: The effective but asymmetric effects of foreign currency reserve requirements
Răzvan Botea
Emerging markets with partially dollarised financial systems are particularly vulnerable to global financial cycles. This column examines how reserve requirements on foreign currency deposits can help mitigate credit booms induced by capital inflows. Focusing on Peru between 2008 and 2017, the authors combine microdata with a calibrated macro model to show that foreign currency reserve requirements reduce aggregate credit growth, with heterogeneous effects across banks depending on their
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