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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.

Suggested Citation

  • Jose Sanchez-fung, 2005. "Estimating a monetary policy reaction function for the dominican republic," International Economic Journal, Taylor & Francis Journals, vol. 19(4), pages 563-577.
    • Handle: RePEc:taf:intecj:v:19:y:2005:i:4:p:563-577
    DOI: 10.1080/10168730500382121
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    Cited by:

    1. Aaron Mehrotra & José R Sánchez-Fung, 2010. "China's Monetary Policy and the Exchange Rate," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 52(4), pages 497-514, December.
    2. 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.
    3. Giray Gozgor, 2012. "Inflation Targeting and Monetary Policy Rules: Further Evidence from the Case of Turkey," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 2(5), pages 1-7.
    4. 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.
    5. Nicolas Moumni & Salma DASSER, 2011. "Relevance of a Taylor-type rule in the active monetary policy of Bank Al-Maghrib ?," EcoMod2011 2766, EcoMod.

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    More about this item

    Keywords

    Monetary policy reaction function; McCallum and Taylor rules; multiple exchange rates; Dominican Republic;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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