Monetary Policy Reaction to COVID-19 and Their Economic Impact in Central America and the Dominican Republic.

This study analyzes the countercyclical monetary policy measures implemented during the COVID-19 pandemic and the early recovery period in Central America and the Dominican Republic (CARD), assessing their economic impact from 2020 to 2022. Using vector autoregressions (VAR) and panel econometric techniques, the research finds that while central banks in CARD countries aimed to stimulate economic activity primarily through interest rate adjustments and unconventional measures, the effects on aggregate economic activity were limited. The study highlights that other policies—fiscal, financial, and regulatory—likely played a more significant role in mitigating the pandemic's negative economic impact. Results also indicate that monetary policy transmission channels vary across economic cycles, with unconventional measures proving comparatively more effective during crisis periods.