Inflation in the Dominican Republic

By: Maria Feliz, 9th Grade

Do you ever wonder why the peso’s worth is constantly changing? Why do prices keep rising and rising? Why ten years ago you could easily buy an apartment, when now you have to wait and save up for a long time? This is due to inflation. Inflation is the rate at which the currency is falling and therefore prices of consumer goods and services rise. You may ask, how does this affect the economy and the people? 

Well, it affects the cost of living. This means electricity and gas prices will go up, as will transport. Food will also become more expensive. Not only this, but inflation means the money you already have will decrease in value. An example might help explain this better. Let’s say yesterday you bought a sandwich at the cafeteria for 5 dollars, and you paid 280 pesos. Today, inflation’s consequences are evident, and the sandwich costs 10 dollars, which should be 560 pesos, yet it is 600 now. The consequences are not only towards individuals, since inflation also affects the country’s economic growth.

Inflation in the Dominican Republic is a big problem. Up to a point, inflation is considered good. This point is between 2% to 3% inflation rate. In 2019, the inflation rate was 1.81%. In 2020, it rose to 3.78%. This year, it doubled to a whopping 6.18%–definitely not healthy. In 2019 the peso was at 51 per dollar, yet this year it is at 56 per dollar.

Printing more money is a major reason for inflation. It causes the value to decrease, because printing more money doesn’t increase the value of money you have. Instead, the value divides to include the new money. Increasing taxes and wages above the level of economic growth can also lead to inflation.

Now, you may be panicking about gas prices and wages and things like that. To that I say, calm down, there’s a solution to inflation. A common method to contrarest inflation is called a contractionary monetary policy. This type of policy aims to reduce the supply of money by lowering prices of bonds and rising interest rates. This will cause consumption to fall, which will affect negatively for a while, until prices lower and inflation rate does too.

References:

  1. ClearTax. (2021, April 19). Inflation & deflation – : Definition, causes, effects, basics. Clear. Retrieved October 12, 2021, from https://cleartax.in/s/inflation-deflation.
  2. Fernando, J. (2021, September 21). What is inflation? Investopedia. Retrieved October 12, 2021, from https://www.investopedia.com/terms/i/inflation.asp.
  3. How does inflation affect your finances. Pru Life UK. (n.d.). Retrieved October 12, 2021, from https://www.prulifeuk.com.ph/en/explore-pulse/health-financial-wellness/high-inflation-hurts-your-finances-more-than-you-think/.
  4. O’Neill, A. (2021, April 28). Dominican Republic – inflation rate 1986-2026. Statista. Retrieved October 12, 2021, from https://www.statista.com/statistics/527466/inflation-rate-in-dominican-republic/.
  5. Vedantu. (2020, December 26). Control of inflation. VEDANTU. Retrieved October 12, 2021, from https://www.vedantu.com/commerce/control-of-inflation.

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