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Estimating a monetary policy reaction function for the dominican republic

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  • Jose Sanchez-fung

Abstract

The paper specifies and estimates a hybrid McCallum-Taylor monetary policy reaction function for the Dominican Republic (DR). The estimated reactions suggest that the Central Bank of the DR has been biased towards targeting the exchange rate. These findings are in line with the evidence on the fear-of-floating characteristic of developing countries. An evaluation of the estimated rule's historical performance shows that monetary base growth below (above) that implied by the 'average' policy reaction is associated with better (worse) macroeconomic performance.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/10168730500382121
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Economic Journal.

Volume (Year): 19 (2005)
Issue (Month): 4 ()
Pages: 563-577

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Handle: RePEc:taf:intecj:v:19:y:2005:i:4:p:563-577

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Related research

Keywords: Monetary policy reaction function; McCallum and Taylor rules; multiple exchange rates; Dominican Republic;

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References

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Cited by:
  1. M. Faizul Islam, 2010. "Subrata Ghatak and Jose R. Sanchez-Fung. Monetary Economics in Developing Countries (Hampshire: Palgrave-Macmillan, 2007, pp. 320)," Journal of International Development, John Wiley & Sons, Ltd., vol. 22(7), pages 1042-1043.
  2. Hasanov, Mübariz & Omay, Tolga, 2008. "Monetary policy rules in practice: Re-examining the case of Turkey," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(16), pages 4309-4318.

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