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- Title
The Dominican Republic's Interbank Market, Volatility and Intervention: The Banking Crisis of 2002-2003.
- Authors
Sánchez-Fung, José R.
- Abstract
The paper investigates banking system instability in relation to the day-today interbank market and monetary policy effectiveness in the Dominican Republic. The analysis reveals a negative relationship among excess banking system reserves and the interbank interest rate and shows that in crisis news affects the interbank rate's volatility asymmetrically and non-linearly. The paper also finds that the 2002-2003 banking crisis and the subsequent central bank intervention as a lender of last resort weakened monetary policy's transmission mechanism. The events complicated the ensuing IMF-supported stabilization attempt, stressing the trade-off between preserving macroeconomic stability and safeguarding financial stability, and the pitfalls of monetary policymaking in a high volatility setting.
- Subjects
DOMINICAN Republic; INTERNATIONAL Monetary Fund; INTERBANK market; TRANSMISSION mechanism (Monetary policy); CENTRAL banking industry; MONETARY policy; BANK reserves
- Publication
Quarterly Journal of Finance & Accounting, 2019, Vol 57, Issue 3/4, p1
- ISSN
1939-8123
- Publication type
Article