Costa Rica During the Global Recession: Fiscal Stimulus with Tight Monetary Policy

Jose Cordero

CEPR Reports and Issue Briefs from Center for Economic and Policy Research (CEPR)

Abstract: This paper shows that, in spite of a reasonably sized fiscal stimulus package, Costa Rica’s economy continues on a downward path, partly because fiscal policy is being offset by a tightening of monetary policy. The paper notes that the International Monetary Fund has insisted that Costa Rica’s monetary policy remain tight due to worries over inflation targets and a perceived risk of a balance of payments crisis. However, the author notes that the IMF could help prevent a balance of payments crisis through the provision of a credit line of foreign currency, as it has done, for example, in Mexico – a vastly larger economy. The paper also examines the government’s macroeconomic policies in recent years, prior to the world recession, to see what alternative policies might have done better.

Keywords: Costa Rica; IMF; stimulus (search for similar items in EconPapers)
JEL-codes: E E5 E51 E52 E6 E62 E63 F F3 F32 F33 F34 O O5 O54 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2009-07
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:epo:papers:2009-23

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