Report on DAAS Recent Activities in Dominica (cont.)
Inaugural Guest Lecture at DSC
Mr. Julius B. Sampson, accompanied by Dr. Shillingford, delivered the first guest lecture to some forty second year economics students on the topic "Monetary Policy and the Economy".
With the present focus on Fiscal Policy as Dominica struggles with its economy, it was felt necessary to emphasize the importance of monetary policy in the management of the economy, the banking system, and control of inflation. After ascertaining the students' grasp of the difference between fiscal and monetary, Mr. Sampson engaged them in a discussion of the policy tools that a central bank has at its disposal to achieve its policy objectives, namely:
a) Open Market Operations: the buying and selling of government securities in pursuit of an expansionary or a contractionary policy, depending upon the needs of the moment.
b) Changes in the Discount Rate and/or the overnight bank rate, often referred to as the Fed funds rate in the United States
c) Moral Suasion: The central bank's use of its moral authority to influence conditions in the banking system in order to safeguard the banking system integrity.
Mr. Sampson, a Finance and Economics graduate, used his twenty four year Wall Street experience to put a practical face on the exercise of monetary policy by the Federal Reserve with references to recent crises such as the Russian debt default in the late nineties, and the continuous monitoring of economic conditions in the US by the Fed resulting in interest rate changes aimed at achieving the twin objectives of economic growth and price stability.
The discussion was also brought down to a local and regional level where the Eastern Caribbean Central Bank, the Fed's local equivalent, recently lowered the discount rate in response to soft regional economic conditions, thus lowering the cost of money in an attempt to boost the regional economy.
By co-incidence the National Commercial Bank, one of the few success stories in Dominica, was celebrating its twenty-fifth anniversary. There had been intensive discussions that week among the public about the relatively high interest rates in Dominica and in particular whether there had been anti competitive forces at work holding interest rates at artificial levels.
The DSC students said they found the lecture meaningful and timely and thanked the Academy for arranging it. In a throw back to his first career as a school teacher, Mr. Sampson asked the students to ponder on the adage: "Education is what is left in you when you have forgotten what you have learnt at school".