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

José Sánchez-Fung

Journal of Developing Areas, 2008, vol. 42, issue 1, 39-52

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.

Keywords: money demand; financial dollarization; monetary policy; automatic general-to-specific (GETS) modeling; Dominican Republic (search for similar items in EconPapers)
JEL-codes: E41 E52 (search for similar items in EconPapers)
Date: 2008
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Handle: RePEc:jda:journl:vol.42:year:2008:issue1:pp:39-52