Browsing by Author "Álvarez-Corrales, Cristian"
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- Efecto de cambios de precio en materias primas sobre los precios domésticos en Costa RicaThe paper analyzes the pass-through of commodities prices to domestic prices in Costa Rica at a macroeconomic and microeconomic level. We analyze whether the pass-through has been strengthened or weakened over the last 40 years; whether commodities price increases have bigger effects on domestic prices than decreases (sign asymmetries); whether the magnitude of the pass-through is proportionally bigger as the size of commodities price changes are increased (size asymmetries) and whether commodities price volatility conditions the size or the asymmetries of the pass-through. Finally, for those industries in which price increases have bigger impact on domestic prices than decreases, we analyze whether such asymmetries are exacerbated by a less competitive structure of industrial organization.We use VAR and structural distributed lags models to deal with the asymptotic bias that emerges when censored VAR models (the traditional approach) are employed to capture asymmetries.We found that the pass-through of commodities prices to domestic prices has been strengthened in magnitude and statistical significance over time. Before the nineties, the pass-through was weak and statistically not different from zero, but from the first half of that decade there is evidence of a significant increase.For moderate commodities price changes (4 or less standard deviations), the magnitudes of the responses of domestic prices to positive and negative shocks do not statistically differ. Only when commodities prices are severely shocked (10 standard deviations) we found sign asymmetries in the pass-through which, contrary to popular belief, indicates a bigger response to negative price changes. Commodities price volatility does not condition this conclusion, sign asymmetries are the same in periods of high and low volatility.At a microeconomic level, we found evidence of positive sign asymmetries in some industries, especially those associated with commodities such as wheat (bakery products and pasta), corn (chicken meat), iron, rice and fertilizers. Related with this finding, we conclude that low degree of market competition is associated with a higher positive asymmetries.As a policy implication we recommend that the competition authority review in depth the industrial organization structure and business practices of dominant companies of those markets for which we found evidence of positive asymmetries in the pass-through of commodities prices changes together with high degree of concentration of suppliers.
- Efectos macroeconómicos de las entradas de capitales en la economia costarricenseDuring the period of 1999-2011 the Costa Rican economy has experienced the incoming of capital inflows in sizeable amounts. Such flows have had, and continue to have, important implications for the effectiveness of the monetary policy conducted by the Central Bank of Costa Rica. The objective of this paper is to measure the quantitative impact of capital inflows on various macroeconomic variables. Special attention will be given to the effects that these flows have on the price of financial and real assets. Credit growth and the appreciation of asset prices that usually follow large capital inflows may have important implications for the stability of financial systems. For this reason, it is of interest for economic policy to determine how large capital inflows may lead to potential financial crisis. In this sense, an additional objective of this paper is to provide a general view of the state of macro-prudential regulation in Costa Rica in terms of the management of capital inflows. The empirical evidence suggests that surges in capital inflows would be associated with an easing of financial conditions in the economy, an expansion of credit, increased aggregate expenditure and higher inflation. Additionally, capital inflows appear to have a mild effect on the price of financial assets and the price of land. However, the price of land in the pacific coastal provinces displays a very strong response to a capital inflows shock. The response of the real state sector and the lending to real estate assets do not suggest that this sector experiences a boom fueled by higher capital inflows. Also, it seems that periods of capital inflows bonanza do not tend to feed a consumption boom. Finally, the steep increase in exports after a shock seems to require higher imports of capital goods and raw materials.
- Estimación de una función de producción para Costa Rica: 1982-2017This paper presents an estimation of a production function for Costa Rica. The result of this estimation indicates that the Costa Rican economy can be regarded as being intensive in human capital, since the alpha parameter associated with the elasticity of output with respect to physical capital is estimated at 0,29. A recursive analysis of the estimation of this parameter does not allow us to conclude with certainty about its probable evolution, since the two exercises designed to approximate its time variation shows that it moves in opposite directions.The calculation of potential GDP indicates that its growth rate for the period 1982-2017 has been 4.4%, although this rate has been progressively lower since the nineties. An analysis of growth accounting shows that the contribution of total factor productivity (TFP) to the growth rate of potential output has been practically nil on average. However, the contribution of the level of education of the population to explain the growth in potential GDP shows a remarkable increase since the nineties.Key words: Production function, potential growth, total factor productiv
- Estimaciones de la tasa de desempleo que no acelera la inflación (NAIRU) para Costa RicaIn this paper we present estimations of the Non-accelerating Inflation Rate of Unemployment or NAIRU for the Costa Rican economy. We highlight the following results: The NAIRU displays an upward trend since the early 90s which was accentuated after the Great Recession when the Costa Rican inflation rate exhibits historically low levels; the estimations of the unemployment gap (the difference between the observed unemployment rate and the NAIRU) indicates that this gap was negative in the nineties and the first half of 2000’s but became positive afterwards. At the second quarter of 2017, the different estimates of the unemployment gap coincide in pointing out that this gap was closed, indicating the absence of aggregate demand pressures. In addition, since 2004, there has been a strengthening in the relationship between inflation and the unemployment gap
- Índice de condiciones financieras para Costa RicaThis paper presents the Financial Conditions Index for Costa Rica. The method of principal components is used to construct the index by weighting 33 individual financial indicators. Instead of proposing a single index, we assess if different treatments applied to the data generate indexes with better properties. Eight different indexes are constructed which are assessed in terms of their correlation with economic activity, the degree in which they Granger cause the latter and their forecast accuracy. According to the different tests applied, it is found that the index denominated as ICF1 has the best performance of all indexes, and for this reason, it is selected as the financial conditions index for Costa Rica. In addition, according to the Diebold and Mariano´s (1995) test of forecast accuracy, it is found that ICF1 exhibit higher forecast accuracy than a disaggregation of this index based on different groupings of variables used in its construction.In addition, an assessment of the effects of monetary policy is conducted in order to test if these effects differ depending on whether the economy is in a regime of tight or loose financial conditions. The estimation of a Threshold Vector Autorregression (TVAR) model confirms that financial conditions act as a propagator of monetary policy shocks. Under the tight regime, monetary policy exerts a substantially higher effect on output than it does on the loose regime. The effects monetary policy on the inflation rate are similar across regimes causing a reduction of the inflation rate after a contractionary monetary policy shock.
- Índice de tensión financiera para Costa RicaIn this paper we present the Index of Financial Stress for the Costa Rican economy. This is a synthetic index constructed using weakly data from 20 variables of the Costa Rican financial system. The method of aggregation used is principal components where financial stress is assumed to be the main driving force behind the co-movement observed between these variables. The index is aimed to be a contemporaneous measure of the degree of stress in the financial system and is expected to be part of the analytic tools available for policy makers in order to assess the stability of the Costa Rican financial system. The index constructed tracks reasonably well various episodes of financial turmoil experienced in Costa Rica, especially, the ones related to the international financial crisis of 2008, the European debt crisis of 2010-2011 and the period of high capital inflows in late 2012.
- Modelos de inflación de corto plazo para los sectores transable y no transable de la economía costarricenseThis paper estimates a set of short-term Phillips Curve projection models for quarterly and monthly series of headline inflation and their breakdowns in tradable and non-tradable of the consumer price index. Subsequently, we evaluate the hypothesis if the forecast errors from a weighted inflation projection (which results from combining inflation forecasts for the breakdowns of tradable and non-tradable) are lower than those obtained from a projection of the aggregate inflation rate. The empirical evidence provided by this paper suggests the usefulness of distinguishing between the data generating processes of inflation in tradable and nontradable sectors. On the one hand, this approach permits to gain a deeper understanding of the short-term major determinants of each of these processes. On the other, there are gains in terms of forecast accuracy, to a one-year horizon, by comparing a weighted projection of tradable and non-tradable inflation with an aggregate inflation projection. In this sense, the models developed in this document constitute a useful complement to the range of models currently in use for forecasting inflation at the BCCR.
- Parámetro de suavizamiento del filtro Hodrick-Prescott para Costa RicaThis paper updates the estimation of the smoothing parameter in the Hodrick-Prescott filter for the Costa Rican GDP series previously performed by Segura and Vásquez (2001). These authors use the method of Marcet and Ravn (2003) to determine these values. However, this method assumes that the standard value of 1600 for quarterly series is appropriate, assumption that has been questioned. For this reason, in order to obtain alternative estimates of this parameter we apply the methods of modified HP filter of McDermott (1997) and optimal filtering of Pedersen (2002). These two methods provide values of the smoothing parameter well below of those obtained with the first method and so, the output gaps display a lesser degree of variability and amplitude compared to the gaps obtained by the application of various univariate filters. On the other hand, the output gaps obtained using the optimal values suggested by Marcet and Raven’s method display greater correspondence with those implied by the univariate filters and exhibit better predictive performance in the period 2013 - 2016. Therefore, even though the methods of McDermott and Pedersen provide lambda values which theoretically are more appropriate than the usual standard values, from a practical point of view they are less informative. The optimal values found are 26, 1800, 22200 for annual, quarterly, and monthly GDP series, respectively; and 26400 for the IMAE index of economic activity.