Sustainability of the Current Account Deficit and External Vulnerability of the Dominican Economy

50 Pages Posted: 13 Apr 2012 Last revised: 23 Oct 2012

See all articles by Carlos Gratereaux Hernández

Carlos Gratereaux Hernández

Autonomous University of Santo Domingo; Western Michigan University

Date Written: July 30, 2009

Abstract

The current context of global economic crisis justifies the need for a thorough analysis of the sustainability of the current account deficit in the Dominican Republic. To this end, we review the theoretical and empirical literature on these issues, focusing on the empirical evaluation of the level of external deficit that is able to keep the economy. From the results of the different methodologies used in this research, it is concluded that in general terms the current account deficit is sustainable in the Dominican economy. Nevertheless, the paper identifies the years in which external imbalances can be considered unsustainable, particularly the deficit -9.7% of GDP in 2008, which should draw the attention of policymakers, given the deterioration of prospects for the short term to the international economic crisis and the resumption of the upward trend in oil prices in mid-2009.

Note: Downloadable document is in Spanish.

Keywords: External Sustainability, Monetary Policy

JEL Classification: E50, F41

Suggested Citation

Gratereaux Hernández, Carlos, Sustainability of the Current Account Deficit and External Vulnerability of the Dominican Economy (July 30, 2009). Available at SSRN: https://ssrn.com/abstract=2038696 or http://dx.doi.org/10.2139/ssrn.2038696

Carlos Gratereaux Hernández (Contact Author)

Autonomous University of Santo Domingo ( email )

Santo Domingo
Dominican Republic

HOME PAGE: http://www.uasd.edu.do

Western Michigan University ( email )

Kalamazoo, MI 49008
United States

HOME PAGE: http://www.wmich.edu/economics

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