Browsing by Author "Odio-Chinchilla, Jaime"
Now showing 1 - 2 of 2
Results Per Page
Sort Options
- Demanda privada real de créditoKikut-Valverde, Ana Cecilia; Odio-Chinchilla, Jaime; Sáenz-Castegnaro, Manrique; Solera-Ramírez, ÁlvaroA demand for credit by the private sector is estimated for Costa Rica based on monthly data over the period 1995 – 2001. This demand is modeled as a function of the real interest rate on lending, real economic activity, and expected future growth in production. We calculate a lending interest rate as the (weighted) average of interest rates across economic activities and across dollar and local currency denominated loans. Given the large proportion of dollar denominated loans in the current banking system portfolio, this is a significant improvement over previous studies typically based on the lending rate for only local currency-denominated loans. Since the interest rate may be an endogenous variable in this model (i.e. correlated with the error term in the demand for credit equation), the US Prime Rate is used as an instrumental variable in a two -stage least squares regression. The results of the regression analysis using two -stage least squares indicates that the semi-elasticity of real private credit with respect to the real interest rate is –4.08. Given an average (lending) real interest rate of 12.9% this implies an interest-elasticity close to –0.53. As expected, this estimate is higher (in absolute value) than the one obtained using OLS. The estimated elasticity of credit demand with respect to economic activity is 1.87. Finally, a one percentage-point increase in expected production growth (proxied by futures effective growth) is estimated to produce a 0.3 percent in demand for real credit.