Resumen de Exchange Rates, Monetary Policy, and Interest Rates in the Dominican Republic during the 1990s Boom and New Millennium Crisis

George Philip

• This article gives an account of the developments in the Dominican Republic's economy from the 1990s boom to the crisis of the new millennium, focusing on the monetary and exchange rate dynamics behind that transition. It is argued that the liberalisation of interest rates in the 1990s, together with an appreciated real exchange rate and weak bank supervision, led to the dollarisation of the banking system. These and other structural imbalances exacerbated the impact of a series of adverse shocks on the economy at the beginning of the millennium, including a banking crisis costing approximately 20 per cent of gross domestic product in 2003.