Peru: Selected Issues
IMF Staff Country Reports, July 15, 2016
Source details
- Canonical URL
- Peru: Selected Issues
Other formats
Bibliographic details
- Published: July 15, 2016
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781475582741.002
Overview
- Comparative analysis of the macroeconomic adjustment in Chile, Colombia, and Peru to commodity terms-of-trade shocks.
- Study conducted in two steps:
- (1) an analysis of the impulse responses of key macroeconomic variables to terms-of-trade shocks
- (2) an event study of the adjustment to the recent decline in commodity prices
Methodology
- Impulse response analysis of key macroeconomic variables to terms-of-trade shocks.
- Event study focusing on adjustment dynamics following the recent decline in commodity prices.
Key findings
- Flexible exchange rates are important to help with the adjustment to lower commodity prices.
- Policymakers should stay vigilant in addressing depreciation pressures on inflation through tightening monetary policies.
- On the fiscal front, evidence shows that greater fiscal space, like that of Chile and Peru, gives more room for accommodating terms-of-trade shocks.
Policy implications and recommendations
- Maintain exchange rate flexibility to facilitate macroeconomic adjustment to commodity price shocks.
- Use monetary policy tightening when depreciation pressures risk elevating inflation.
- Preserve or build fiscal space to provide room for accommodating terms-of-trade shocks through countercyclical fiscal actions.
Content in this bundle
- Peru: Selected Issues; IMF Country Report No. 16/235; June 3, 2016