Page 1 of 20 J.R. Sánchez-Fung: Macroeconomic policy in the Dominican Republic… Macroeconomic policy in the Dominican Republic: Progress and challenges José R. Sánchez-Fung University of Nottingham, Ningbo 22 November 2019 Centro Latinoamericano-Suizo University of St. Gallen St. Gallen, Switzerland
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Macroeconomic policy in the Dominican Republic: Progress ... · Source: produced by the author using the IMF’s online DataMapper facility Page 15 of 20 J.R. Sánchez-Fung: Macroeconomic
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Page 1 of 20
J.R. Sánchez-Fung: Macroeconomic policy in the Dominican Republic…
Macroeconomic policy in the Dominican Republic:
Progress and challenges
José R. Sánchez-Fung University of Nottingham, Ningbo
22 November 2019
Centro Latinoamericano-Suizo
University of St. Gallen
St. Gallen, Switzerland
Page 2 of 20
J.R. Sánchez-Fung: Macroeconomic policy in the Dominican Republic…
ABSTRACT
1. The Dominican Republic’s economy grew at a solid pace during the
1990s and up to the start of the new millennium. However, imbalances
in the economy and policy mistakes contributed to exacerbating the
negative impact of the banking crisis occurring in 2002-2003.
2. Subsequent reforms focusing on monetary policy have so far yielded
positive outcomes, mainly in the shape of a maturing inflation-
targeting framework. However, progress in refining fiscal policy’s
design and implementation is somewhat lagging behind.
3. Looking ahead, consolidating macroeconomic policy demands a firm
commitment to achieving clear economic objectives. For instance, by
promoting rules-based principles in managing fiscal policy.
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J.R. Sánchez-Fung: Macroeconomic policy in the Dominican Republic…
PLAN FOR THE PRESENTATION
The Dominican Republic economy’s long-run growth
performance
Reforms and growth in the 1990s, and crisis in the new
millennium
Reforming monetary policy
Fiscal policy: status quo?
Challenges for macroeconomic (fiscal-monetary)
policy
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J.R. Sánchez-Fung: Macroeconomic policy in the Dominican Republic…
THE DOMINICAN REPUBLIC ECONOMY’S
LONG-RUN GROWTH PERFORMANCE
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J.R. Sánchez-Fung: Macroeconomic policy in the Dominican Republic…
Source: produced by the author using the IMF’s online DataMapper facility
Page 6 of 20
J.R. Sánchez-Fung: Macroeconomic policy in the Dominican Republic…
NOTE outstanding period in graph during last 40 years
REFORMS AND GROWTH DURING THE 1990S
Story on the Dominican Republic’s long-run growth
performance:
S. Pozo, J.R. Sánchez-Fung, and A.U. Santos-Paulino (2011)
Macroeconomics and Finance in Emerging Market Economies
doi.org/10.1080/17520843.2011.548594
Economic growth accounting exercise
Time-series-based econometric modelling analysis using many
explanatory variables
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J.R. Sánchez-Fung: Macroeconomic policy in the Dominican Republic…
…STILL
CRISIS AT THE START OF THE 2000s
Economic analysis
J.R. Sánchez-Fung (2019)
Quarterly Journal of Finance and Accounting
business.creighton.edu/qjfa
Page 8 of 20
J.R. Sánchez-Fung: Macroeconomic policy in the Dominican Republic…
Banking supervision failures
Banking rescue effort circa 20% of GDP -complex rescue
Broken transmission mechanism of monetary policy via
interest rates (see graphs below)
So difficult to stabilize expectations
J.R. Sánchez-Fung (2008)
Macroeconomics and Finance in Emerging Market Economies