Browsing by Author "Tenorio-Chaves, Edwin"
Now showing 1 - 10 of 10
Results Per Page
Sort Options
- Costa Rica: sensibilidad del capital de cartera al premio e implicaciones para la política económica (1991-2007)This paper estimates the impact that changes in domestic premium had on portfolio flows of investment in Costa Rica during the period 1991-2007. According to the approaches of Ralhan (2006), LeFort and Budnevich (2005) and Gibson, Tsaveas, and Vlassopoulos (2006), a model that combines the arbitrage condition with push and pull factors was constructed. The econometric models did not show strong statistical evidence in measuring the sensibility of the capital flows as a result of changes in the mark up between domestic investments in colones and foreign investment in dollar. However, a VAR analysis suggests that an increase of 100 basis points in the mark up between domestic investments in colones or dollar induces resident investors to translate around $200 millions of their dollar denominated position to saving instrument denominated in colones (8% of the total volume negotiated in the wholesale exchange market of 2006). This response represents additional downward pressure on the exchange rate which is currently located at the lower limit of the crawling band. Other VAR results indicates that an increase of forty basis points in the sovereign risk produces an annual capital outflow of $44 millions, and an increase of 100 basis points in the financial activity indicator (total liquidity / GDP) will attract an amount of capital of about $20 millions in one year.
- La Curva de Phillips en Costa RicaMuñoz-Salas, Evelyn; Rojas-Sánchez, Mario Alfredo; Sáenz-Castegnaro, Manrique; Tenorio-Chaves, EdwinThe main objective of this investigation is to estimate an Expectations Augmented Phillips Curve function with the error correction mechanism, applying the Engle and Granger’s two step method. This exercise was done before with annual data (Rojas, 2002) but the parameters were estimated with low precision. In this occasion, the model is estimated with quarterly data, for the period 1991.01 to 2001.04, with an econometric technique that restricts the long run behavior of the endogenous variable to converge to their cointegrating relationships (static) while allowing for short run adjustment dynamics. The main results allow us to infer that more than 90% of the domestic inflation rate’s behavior is explained as a function of the nominal devaluation rate, the external inflation rate, the output gap and the lagged domestic inflation rate. Also, the forecasting obtained with the this model one quarter ahead, had the best adjustment with respect other models (AR and no change)
- Estimación de la tasa de interés real neutral para la economía costarricense (1991-2006)The neutral real interest rate (NRIR) is the real interest rate consistent with output converging to potential output and therefore with stationary inflation in that sense, NRIR provides a guide to a central bank in setting its policy interest rate. The neutral real interest rate is an unobservable variable and economic theory implies that its dynamic response to shifts in output, technology and in the rate of consumption time preference. This paper presents the first estimations of NRIR for the Costa Rica economy, and uses monthly and quarterly data for the period 1991-2006. Four alternative ways are use to estimate the neutral rate of interest. The first approach approximates NRIR with the real ex-ante interest rate average during a period of inflation stability; this approximation is complemented with a second univariate technique based on Hodrick- Prescott filter. The last two specifications (multivariate) use the uncovered interest rate parity condition and a semi-structural model. The latter model applies the method suggested by Laubach and Williams, and uses the Kalman Filter to solve a bivariate model in order to estimate de NRIR and the potential output. The estimations suggest that during the period 2001-2006 the neutral real interest rate for Costa Rica was around 3%.
- Migración de la banda cambiaria hacia un régimen de flotación administradaThis document describes the historical context of the exchange rate regime of Costa Rica up to January of 2015, as well as the opportunity to migrate to a more flexible exchange rate market. The document discusses the most relevant arguments that the authorities must take into consideration when making this type of decision. For example, we discuss the potential impact to Costa Ricans and the economic activity, and details on the legal implications of such a decision. Finally, we discuss the most appropriate communication strategies to let know the general population of a change like this.
- El modelo macroeconómico de proyección trimestral del Banco Central de Costa Rica en la transición a la flexibilidad del tipo de cambioDuring the last two decades, the Central Bank of Costa Rica (CBCR) have based its monetary policy following a balance of payment monetary approach, trying to promote price stability by controlling monetary aggregates. Nevertheless, this has been done along with a fixed exchange rate regime and increasingly capital mobility. As a result, CBCR have lost partial monetary management and therefore inflation control. In 2005 CBCR decided to advance towards an Inflation Target scheme (IT). The success of this policy strategy is based on the capacity to anchor inflation expectations to the CB’s target; to do so a basic requirement is to leave the exchange fixation. Costa Rican authorities have decided to migrate gradually to a flexible exchange rate regime. Consequently, in October 2006, the exchange rate regime was switched to a crawling band, additionally the CBCR adopted a series of changes in order to use the interest rate as a monetary policy instrument. In order to support this transition process we specified a Quarterly Projection Macroeconomic Model (QPMM) that contains the basic elements of those developed by others central banks that have successfully followed an IT regime. The basic model consists of five equations: The New Keynessian Phillips Curve characterizes the dynamic relationship between inflation, output gap and inflation expectations. The expectation process is determined by inflation target announced by the Central Bank, imported inflation and an indicator of misleads between actual and inflation target in the past. According to the IS Curve, the output gap is determined by real interest rate misalignments from the long run natural interest rate, movements in real exchange rate and in the main commercial partner’s output gap; A forward-looking interest rate policy rule establishes that the Bank adjusts policy interest rate as a response to forecasted inflation deviation from its target, considering a smoothing parameter associated with the lagged real interest rate. The macroeconomic model is completed with an equation that determines the short run dynamic of the nominal exchange rate obtained from a risk-adjusted uncovered interest rate parity expressed in real terms. This quarterly semi structural model shows dynamic homogeneity. The QPMM transmissions mechanisms are mainly associated with the aggregate demand channel, direct and indirect exchange rate and the expectations channel.
- Un modelo para estimar el nivel óptimo de reservas monetarias internacionales para Costa RicaAs part of the measures that the Central Bank of Costa Rica (CBCR) has taken in the transition to a inflation targeting regime, in October 2006 the adjustable peg exchange rate regime was replaced by a exchange rate band, as a transitional measure to adopt a managed float regime. To the extent that this process is consolidated, the explicit need for net international reserves (NIR) as a safeguard of the exchange regime is becoming smaller, however, it is required to have an estimation of the optimal level, among other reasons, to support CBCR intervention decisions in the foreign exchange market, if required. This paper proposes a model for the optimal level of foreign currency reserves for the CBCR from which this variable is estimated for the period 2006-2009. It uses the theoretical approach developed by Ben-Bassat and Gottlieb (1992), which assumes that a central bank seeks to minimize the expected cost of holding reserves. The definition of this cost takes into account two factors, firstly, there is an opportunity cost associated to maintaining foreign currency reserves. On the other hand, these assets act as insurance in crisis situations, enabling the economy to minimize the real and social costs of macroeconomic adjustment associated.