The List?n Diario reports that money in circulation has grown by over 60% over the last six months. According to reporter H?ctor Linares, the currency grew by RD$23.36 billion during this period, and was partially offset by the restrictive monetary measures carried out by the Central Bank and the Monetary Board. Circulation grew from RD$38.39 billion on 31 December 2002, to RD$61.76 billion last 30 June.
According to Linares, the close relationship that this economic variable has with the exchange rate and the general price index helps explain the reason behind many of the restrictive moves made by the Central Bank.
According to the story, the growth of money in circulation is due in large part to the Central Bank?s policy to aid those commercial banks that were having trouble with their liquidity, and, of course, the rescue of those institutions that were in serious trouble. Advances and rediscounts were the two instruments most used in this process. The Central Bank has published information that the commercial banks? woes are primarily due to loans made by the banks to affiliate companies. Dominican taxpayers are now obliged to pick up the high cost in the name of stability of the banking system.
Over the past six months, the Central Bank has also emitted RD$20 billion in certificates to help offset the increases in circulation.