Macrofinancial Linkages and Growth at Risk in the Dominican Republic

November 13, 2019

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Olga Bespalova, and Marina V Rousset. Macrofinancial Linkages and Growth at Risk in the Dominican Republic, (USA: International Monetary Fund, 2019) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper uses the Growth-at-Risk (GaR) methodology to examine how macrofinancial conditions affect the growth outlook and its probability distribution. Using this approach, we evaluate risks to GDP growth in the Dominican Republic using quarterly data for 1996-2018. We group macrofinancial conditions in five principal determinants, based on 32 indicators. The Dominican Republic’s growth distribution appears most vulnerable to negative shocks to domestic financial conditions, domestic leverage, domestic demand, and external demand, with additional repercussions from the external cost of borrowing in the longer run. Our findings show that domestic monetary policy plays a particularly important role in reducing growth vulnerabilities when the economy is weak.

Subject: Asset and liability management, Credit, Financial sector policy and analysis, Growth-at-risk assessment, Liquidity, Macrofinancial linkages, Money

Keywords: Borrowing cost, Credit, Dominican Republic, External borrowing costs, External cost, Financial condition, Financial conditions, Financial-market openness, GaR methodology, Global, Growth at Risk, Growth-at-Risk methodology, Impact monetary policy, Interest rate, Liquidity, Liquidity condition, Macroeconomic condition, Macrofinancial linkages, Monetary policy variable, Transmission mechanism, WP

Publication Details

Pages:

19
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/246
Stock No:

WPIEA2019246
ISBN:

9781513519203
ISSN:

1018-5941

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