Notas Técnicas
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- Evolución del costo de vida de Costa Rica en comparación con los países de la OCDE y ciudades de LatinoaméricaIn this study, the cost of living in Costa Rica, and its capital San José, is analyzed and compared to OECD countries and some major cities in Latin America using the PPP-adjusted price level index from the Eurostat-OECD program (2017-2020) and the Worldwide Cost of Living Index from The Economist Intelligence Unit (2007-2020). In particular, Costa Rica has maintained a cost of living below OECD countries, but the cost has increased compared to certain upper and middle-income countries in Latin America. The city of San Jose shows a similar updward trend. The analysis by product groups identifies six categories in which Costa Rica has maintained a price level above Latin America and OECD countries: 1) bread and cereals, 2) alcoholic beverages, 3) personal transport equipment, 4) milk, cheese, and eggs, 5) non-alcoholic beverages, and 6) fish. Additionally, there are three categories in which Costa Rica is relatively more expensive than similar countries in Latin America: 1) health, 2) education, and 3) fruits, vegetables, and potatoes. Factors associated with entry barriers, lack of competition, tariffs, state participation in the market, and structure of public expenditure in health and education may contribute to explain why Costa Rica is relatively more expensive in those categories.
- La tasa de interés real neutral en una economía abierta y pequeña: el caso de Costa RicaThis study updates the Costa Rica’s natural real interest rate (NRIT) estimate for the period between 2010’s first quarter and 2023’s third quarter. I use two different methodologies for this estimation: Holston, Laubach and Williams (2023)’s semi-structural model and a structural VAR proposed by Brzoza-Brzezina (2002). This study’s methodological contribution is to estimate an extension of Holston-Laubach-Williams framework to incorporate conditions that are inherent in an open and small economy. The main result is that the natural real interest rate has oscilated between 1, 18% and 1, 47% during the period in analysis, and has been in the interval between 1, 36% and 1, 44% after 2022. Further, I check that the real interest rate gap correlation with other economic variables, like output gap, inflation and real exchange gap, shows a sign that is expected. Finally, I conclude that the Central Bank’s monetary policy has been consistent with its objective of maintaning a low inflation.
- Una aproximación del tipo de cambio real para Costa Rica, enfoque BEER 2007-2022This paper describes the methodology and results of estimating the equilibrium real exchange rate (ERER) using the reduced-form approach known as the Behavioral Equilibrium Exchange Rate (BEER). The real exchange rate (RER) equation is estimated with quarterly data in the period between I-2007 and IV-2022, which coincides with the adoption of exchange rate flexibility regimes in Costa Rica. The results indicate that the path of the ERER is explained by the evolution of its fundamentals: labor productivity, government expenditure, international investment position, terms of trade and the difference among local and external interest rates. Improvements in labor productivity, increases in Government spending and increases in the spread of local and external interest rates are correlated with downward movements in the equilibrium path of the RER (real appreciations). On the other hand, the more negative result in the international investment position and a fall in terms of trade explains movements towards real depreciations. During the period of analysis, there is no evidence of RER deviations from its equilibrium level beyond the coherence zone determined. Therefore, the variations on the ERER trajectory are consistent with the behavior of its fundamentals.
- Implementación de la curva soberana estimada por el BCCR en las pruebas de tensión de instrumentos de renta fijaThis technical note describes the procedure currently used by the Central Bank of Costa Rica (BCCR, by its initials in Spanish) to conduct stress tests on the portfolios of financial entities. The analysis identified two opportunities for improvement compared to the current practice; a procedure that was implemented as part of a technical assistance provided by the IMF. First, the stress tests are calculated based on the estimation of the PAR yield curves in colones and dollars carried out by the BCCR, which better reflect the behavior of the Costa Rican market. Secondly, resampling methods are used to determine the loss distribution based on available data, rather than using only predefined shocks, which facilitates the comparison of the predefined shocks currently used with the actual observed events. In conclusion, it is recommended to implement these two improvements in the execution of the stress tests.
- Volatilidad del tipo de cambio nominal en Costa RicaThis technical note makes a recount of the volatility of the exchange rate of the Costa Rican colon with respect to the US dollar since 1983. This is done through two common volatility measures: a stardard deviation and a GARCH volatility estimate. Historically, eight high volatility episodes are identified. These happened mostly during the exchange rate band regime, which is also the regime that showed higher volatility, on average. To complement this analysis, the volatility measures are compared to a group of 154 additional currencies. This leads to the conclusion that only two of the high volatility episodes can be considered of high volatility, internationally. In addition, that most of the time, there are more currencies showing a higher volatility than the colon than currencies showing lower volatility.
- Indicador para el seguimiento del saldo de reservas internacionales netas (RIN) para Costa RicaThis document presents an indicator for monitoring the balance of international reserves. This indicator is based on the Assessing Reserve Adequacy (ARA) metric, a methodology proposed by the International Monetary Fund (IMF) to identify the level of adequate reserves. The indicator reflects a broad range of potential sources of external instability in the economy. In addition, according to studies carried out by the IMF, the indicator is best at predicting episodes of external crises than other alternative measures of adequate reserves. It is suggested to consider the indicator designed for economies with a floating exchange rate for its application to the case of Costa Rica, in line with the exchange regime adopted in 2015. The indicator is estimated for the country for the period 2019 to 2022, where it is concluded that the reserves were above the minimum adequate level suggested by the IMF in most quarters.
- Cálculo del parámetro de suavizamiento del filtro Hodrick-Prescott para Costa RicaThe Hodrick-Prescott filter decomposes time series in its trend and cycle components. Applications of this filter include the analysis of production or economic activity time series to study business cycles. The filter’s smoothing parameter (λ) varies for each country (Marcet and Ravn 2003). This technical note describes the estimation of the parameter λ for the case of Costa Rica. The values obtained are λ =1 677 for the quarterly series of GDP, λ =15 917 for monthly and λ =26 for yearly. For the monthly economic activity index λ =13 176.
- Operadoras de Pensiones Complementarias: Análisis de la composición de la cartera de inversión (enero 2012 – mayo 2022)This study describes the evolution of investments in foreign issuers by Complementary Pension Fund Operators belonging to the Mandatory Pension Regime of Costa Rica, and presents a review of measures taken by similar countries in the face of the same phenomenon.
- Relación entre los precios de las materias primas y la inflación en Costa RicaThis paper analyzes empirically the relationship between the variations of international commodity prices and inflation in Costa Rica in the period from January 2000 to December 2021. The pass-through of the commodity prices to the consumer prices is analyzed through the supply chain using the consumer price index (IPC), the manufacture producer price index (IPP-MAN) and the commodity price index (IP-MPi). A recursive model of Autoregressive Vectors allows us to represent the relationship between these variables. The results indicate that the pass-through from commodity prices to inflation is small. For example, an increase of 10 percentage points in the variation of the prices of commodities in the international market will increase inflation on 0.27 p.p. after six months. The review of the relationship according to groups of items of the CPI that have or do not have regulated prices suggests that the pass-through to domestic prices occurs mainly on the group of goods and services with regulated price. In addition, there is evidence of heterogeneity in price response by subclasses of items.
- Metodología dinámica para el cálculo de la curva de rendimientos soberana en moneda nacionalIn this article we analyze the use of a dynamic methodology to estimate the sovereign yield curve that calculates the Central Bank of Costa Rica. This dynamic methodology is based on the one proposed by Diebold et al. (2006). We compare the performance of this approach, both in-sample and outof- sample, with the methodology that the Central Bank has been using during the last years, which is based on the static parametric methods proposed by Nelson and Siegel (1987) and Svensson (1994). We show that dynamic methodology generates a yield curve estimation that approximates market conditions better than the other methods, especially in those weeks in which we observe less transactions.
- Una curva de rendimiento par soberana en dólares: el uso de un enfoque dinámicoWe estimate a weekly government debt in US dollars par yield curve for Costa Rica. To choose the estimation method, we analyze three parametric techniques: Nelson and Siegel’s method, Svensson’s method and a dynamic approach developed by Diebold et al.We use all Costa Rican sovereign debt in US dollars transactions in the primary and secondary market.We concentrate in transactions of fixed rate and zero-coupon bonds for the period between January 2009 and November 2021. The evaluation of the results from the three methods allow us to conclude that the dynamic approach shows a better balance between in-sample fit and out-of-sample forecast than the static methods. The main reason is that the static methods suffer of an over-fitting problem for those weeks with a small number of observations: they fit well the observed sample, but sometimes present atypical behavior for the curve sections in which there is not available information. The dynamic method fixes this problem by using past information to estimate an expected yield curve for any week, and then only use the new weekly information to adjust the estimation in those points in which the expected yield curve is far from those observed points. Therefore, we recommend using this dynamic method for estimating this yield curve.
- Cómputo del coeficiente de Gini para los cantones de Costa RicaI detail the computation for the Gini coefficient for Costa Rican municipalities. I use the regional Gini coefficient computed by the National Statistics and Census Institute (INEC) and the Economic Variables Record (REVEC) of the Central Bank of Costa Rica (BCCR). With the REVEC I compute the income inequality measure for each municipality using the geographic location inside the country and the information about income. As the REVEC only has information about the formal sector, I use the regional Gini coefficient from the INEC to correct for the potential inequality due to the informal sector. I found that the Gini coefficient of the formal sector for each municipalitiy is between 0,225 and 0,390, whereas the coefficient with the correction for the informal sector is between 0,379 and 0,664. Then, to diminish the informality could reduce inequality. In the ideal case, with cero informality, the inequality level would be similar to the less unequal countries in the OECD.
- El modelo de proyección macroeconómica (MoP) del Banco Central de Costa RicaIn every central bank, macroeconomic modeling is a continuous process, which seeks to incorporate advances in knowledge and the reality of the economy into the analysis and projection tools. In the case of Costa Rica, the macroeconomic model has been adapted to the changes that the Central Bank has progressively adopted, first in the flexibility of the exchange rate scheme, and later with the adoption of an inflation target regime. The macroeconomic projection model (MoP) presented here is one of the main tools that allows the evaluation of the quarterly projection exercise carried out by the BCCR.
- Contrafactual: participación de la Zona Franca en la actividad económica costarricenseWe do a computation about the impact of the Free Zone in Costa Rica. We sum the transactions amount due to firms linked to this regime conditioning on the differences for buys and sells between local firms and multinationals (MNCs). Also, we compute and add indirect effects. We use the evidence from Alfaro-Ureña, Manelici y Vásquez (2019) about productivity improvements of local suppliers to MNCs and the evidence from Huertas-Morales, Loaiza-Marín y Ortiz-Coto (2021) about higher linkages of MNCs relative to local firms. This information allow us to compute the counterfactual about how transaction amounts would diminished in Costa Rica without the firms producing in the Free Zone. We compare our results with the “Balance de Zonas Francas” published by Procomer. In general, that Balance states that the importance of the Free Zone in Costa Rica is 6.7% of GDP in 2016, while our proposed computation measures 8.18% of GDP for the same year.
- Valoración: Banco de Costa RicaEl objetivo de este trabajo es realizar una valoración preliminar para el conglomerado financiero, Banco de Costa Rica y sus subsidiarias para establecer un rango de referencia del valor de mercado de dicha entidad pública. Para ello, se utilizan dos modelos de valoración de entidades financieras: el modelo de crecimiento de Gordon y el modelo de rentabilidad en exceso sobre el capital. En ambas metodologías se recurre a información pública y a una serie de supuestos restrictivos, pero necesarios, para realizar la valoración. A partir de los modelos seleccionados se tiene que el valor del conglomerado financiero, Banco de Costa Rica y sus subsidiarias, se ubica entre USD 1 802 millones (modelo rentabilidad en exceso sobre el capital) y USD 2 453 millones (modelo de Gordon). La principal diferencia entre ambos enfoques radica en los supuestos sobre el crecimiento y comportamiento de los flujos esperados.
- Estimación del producto potencial para Costa Rica. 1995-2021.The potential output of an economy is an unobservable variable whose evolution is closely monitored by policymakers. To deal with estimation uncertainty, at the Central Bank of Costa Rica potential output is estimated by a combination of methodologies: a production function approach and two statistical methods. In this note we present an updating of the potential output for Costa Rica using the GDP data based on the structure of the economy for the reference year 2017 and taking into account data from 1995 up to the years of the COVID-19 pandemic. The results suggest that the Costa Rican economy is labour-intensive, in line with previous studies, and that the average rate of growth for potential output would be 3,8% for the 2021-2027 period. We estimate that the COVID-19 pandemic temporarily reduced potential growth to 0,6% during 2020. The resulting output gap is useful for modelling inflation.
- Índice de avisos de empleo para Costa Rica 2010 - 2021This paper presents a first labor demand index for Costa Rica, calculated from the National Employment Agency (NEA) website. The index shows procyclical behavior. Furthermore, the vacancy creation index showed a trend consistent with the heterogeneity in the economic activity across sectors, regions, and occupations during 2010-2021. Particularly, in the context of the COVID-19 pandemic, the activities most affected by the mobility restrictions during the first half of 2020 also reported the deepest contractions in their labor demand. Between the second half of 2020 through the last months of 2021, industries such as manufacturing, administrative and support service activities, information, and communication stood out for their more pronounced increase in their labor demand. Firms located in Heredia, Cartago, and Guanacaste, and occupations related to operators and assemblers of manufactures, professionals and scientists, and workers for support services and administrative services also reported higher vacancy creation.
- Beneficios intangibles de la Inversión Directa (ID) en Zonas Francas en Costa Rica: Resumen de resultadosThis paper quantifies intangible benefits that arise from the interaction of multinational companies in the Free Trade Zone regime with their workers and with Costa Rican capital companies (domestic). We quantify this by comparing those benefits to the ones of multinationals outside this regime. Specifically, we calculate the increase in productivity that domestic firms experience from supplying multinationals, and the additional salary (or wage premium) experienced by multinational workers compared to what they would have received by working in domestic companies. We find that those new suppliers of multinationals in the Free Trade Zone experience a 23% increase in their productivity during the fourth year after starting the supply relationship, while those that supplied multinationals outside this regime only received a 4% productivity increase. Likewise, the wage premium of the multinational company outside the Free Trade Zone is 8,5%, while the wage premium of multinationals in the Free Trade Zone is 18,4%.
- Metodología para definir un indicador del costo de captación en colones en el sistema financiero costarricenseThe development of financial markets relies on the use of reference interest rates. These rates allow parties to negotiate variable rate financial contracts. This article introduces a methodology that allows to find an indicator that approximates the funding cost in colones, which might be used as a reference rate. We create 94 possible indicadors and rank them in terms of how similar they are to the funding cost. We conclude that there is a simple indicator that does well. It is a weighted average of term deposite and overnight account rates. For the term deposite rate we calculate for each maturity a weekly average rate weighted by the amount of each transaction. The indicator is an average of these rates weighted by the proportion that each maturity has represented in the intermediaries funding during the last year. The overnight account rate corresponds to the average cost obtained directly from the intermediaries’ financial statements.