Dollarization and Foreign Exchange Reserve: Debate on the Effectiveness of Monetary Policy in DR. Congo

Christian Pinshi

MPRA Paper from University Library of Munich, Germany

Abstract: The high degree of dollarization combined with low foreign exchange reserves obstruct the management of monetary policy. The debate is launched on the effectiveness of monetary policy in this context of dollarization and meager reserves. To restore the effectiveness of monetary policy in the DR Congo, we advocate for fiscal discipline (that is to say, eradicate fiscal dominance) that is constant and sustainable, a guarantee of sustainable macroeconomic stability. Monetary targeting should remain the adopted strategy until proven otherwise and the choice of a floating exchange rate regime is better for good macroeconomic management in the case of the DR Congo. However, changes in the nominal exchange rate should be implicitly included in the implementation of monetary policy.

Keywords: Monetary policy; Dollarization; Foreign exchange reserve (search for similar items in EconPapers)
JEL-codes: E42 E51 E52 F31 (search for similar items in EconPapers)
Date: 2019-11
New Economics Papers: this item is included in nep-mac and nep-mon
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Related works:
Working Paper: Dollarization and Foreign Exchange Reserve: Debate on the Effectiveness of Monetary Policy in DR. Congo (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:104807

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