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Monetary policy reaction dynamics in a developing economy: evidence for the Dominican Republic

Author

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  • Sanchez-Fung, Jose R.

    (NUBS University of Nottingham, Ningbo, China)

Abstract

This paper investigates the central bank's behaviour in a developing economy through a nominal monetary policy feedback rule (NFR) that embodies an inflation targeting mechanism. Particularly, the Dominican Republic is modelled by allowing the hypothetical NFR to receive feedback from inflation and exchange rate (market and official rates differential) gaps. The findings show that, on average, an ‘accommodative’ monetary policy was pursued during the period investigated. However, some evidence of monetary tightening in response to adverse developments in the exchange rate indicator is also unveiled.

Suggested Citation

  • Sanchez-Fung, Jose R., 2003. "Monetary policy reaction dynamics in a developing economy: evidence for the Dominican Republic," Economics Discussion Papers 2003-1, School of Economics, Kingston University London.
    • Handle: RePEc:ris:kngedp:2003_001
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    Keywords

    Nominal monetary policy feedback rule (NFR); ‘implicit’ inflation targeting; multiple exchange rate markets; 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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