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Money demand in a dollarizing economy:the case of the dominican republic

Author

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  • José R. Sánchez-Fung

    (Kingston University, London, UK)

Abstract

This paper investigates money demand in the Dominican Republic. The study employs monthly economic time series covering a period of stabilization and rapid economic growth alongside financial dollarization. The analysis reveals meaningful long-run relations for narrow and for broad monetary aggregates. Importantly, the study argues that the broad money demand function's peso-dollar interest rate differential coefficient could be capturing financial dollarization. However, short-run modeling unveils coefficient instability, and that could jeopardize money demand's traditional role in designing and executing monetary policy.

Suggested Citation

  • José R. Sánchez-Fung, 2008. "Money demand in a dollarizing economy:the case of the dominican republic," Journal of Developing Areas, Tennessee State University, College of Business, vol. 42(1), pages 39-52, September.
    • Handle: RePEc:jda:journl:vol.42:year:2008:issue1:pp:39-52
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    Citations

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    Cited by:

    1. Rana Ejaz Ali Khan & Qazi Muhammad Adnan Hye, 2013. "Financial liberalization and demand for money: a case of Pakistan," Journal of Developing Areas, Tennessee State University, College of Business, vol. 47(2), pages 175-198, July-Dece.

    More about this item

    Keywords

    money demand; financial dollarization; monetary policy; automatic general-to-specific (GETS) modeling; Dominican Republic;
    All these keywords.

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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