Inflation Targeting and Quantitative Tightening: Effects of Reserve Requirements in Peru

This paper provides an overview of the reserve requirement measures undertaken by the Central Bank of Peru. It provides a rationale for the use of these instruments as well as empirical evidence of their effectiveness by means of a novel counterfactual policy evaluation method. In general, the results show that tightening reserve requirement has the desired effects on interest rates and credit levels at both banks and smaller financial institutions (cajas municipales).