Asymmetries in the Exchange Rate Pass-Through to Domestic Prices During the Period of Exchange Rate Flexibility in Costa Rica

Carlos Brenes-Soto () and Manfred Esquivel-Monge ()
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Carlos Brenes-Soto: Department of Economic Research, Central Bank of Costa Rica
Manfred Esquivel-Monge: Department of Economic Research, Central Bank of Costa Rica

No 1706, Documentos de Trabajo from Banco Central de Costa Rica

Abstract: The paper analyses the exchange rate pass-through to domestic prices in Costa Rica during the current exchange rate flexibility period and tests whether there is evidence of asymmetry. For this end, we estimate structural distributed lag models that encompasses symmetric and asymmetric data generating process in line with Kilian y Vigfusson (2011). We found evidence of sign asymmetry in the bivariate relationship between inflation and exchange rate and when controlling for interest rate differential and output gap. ***Resumen: El documento analiza el traspaso de movimientos en el tipo de cambio hacia los precios en Costa Rica durante el período de flexibilidad cambiaria y somete a prueba la hipótesis de presencia de asimetría. Se emplean modelos estructurales de rezagos distribuidos que engloban procesos generadores de datos simétricos y asimétricos como casos especiales, en línea con lo propuesto por Kilian y Vigfusson (2011). Se encuentra evidencia de asimetría de signo en la relación bivariada entre inflación y tipo de cambio, y al controlar por diferencial de tasas de interés y brecha del producto.

Keywords: Pass-through asymmetry; Exchange rate; Exchange rate flexibility, Asimetría en traspaso, Tipo de cambio, Flexibilidad cambiaria (search for similar items in EconPapers)
JEL-codes: E31 E37 E58 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2019-07
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Persistent link: https://EconPapers.repec.org/RePEc:apk:doctra:1706

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