Costa Rica: Selected Issues

International Monetary Fund

No 2023/443, IMF Staff Country Reports from International Monetary Fund

Abstract: This Selected Issues paper focuses on the neutral interest rate in Costa Rica. Estimates of Costa Rica’s real natural rate of interest are between 0 and 3 percent, with a suite of semistructural and univariate methods reaffirming this conclusion at close to 1 percent. This toolkit of multiple differing methods accounts for characteristics of the Costa Rican economy and suggests current monetary policy remains restrictive. Univariate estimates for Costa Rica are between those for the United States and largest regional peers. Structural changes to the Costa Rican economy, particularly in recent years, have important implications for the movement in the neutral rate. A suite of univariate methods also reaffirms this conclusion and suggests current monetary policy remains restrictive. Estimates for Costa Rica are between the United States and largest regional peers. Replicating the univariate approach for the United States and other countries in Latin America suggests Costa Rica has a somewhat lower neutral real interest rate than the largest regional peers, Brazil and Mexico, which currently appear to have neutral rates above 2 percent but above the United States.

Keywords: labor market characteristic; refugees in Costa rica; estimation uncertainty; neutral real interest rate; card payment fee; Real interest rates; Migration; Labor markets; Social assistance spending; Caribbean (search for similar items in EconPapers)
Pages: 21
Date: 2023-12-22
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Persistent link: https://EconPapers.repec.org/RePEc:imf:imfscr:2023/443

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