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The pass through effect of the Central Bank of Costa Rica monetary policy interest rate to the interest rates of the financial system

José Pablo Barquero Romero and David Ricardo Mora Guerrero

Revista de Ciencias Económicas, 2015, vol. 33, issue 1

Abstract: The paper has two parts, the first part tests from the Engle and Granger (1987) point of view the following hypothesis: i) the pass through is equal to one, ii) the pass through changed after the adoption of a new exchange rate regime, iii) the pass through speed changed along with the change in the exchange rate regime (non-linearity), iv) the banks in the financial system do not adjust symmetrically their interest rates (in order to increase their profit margin). In the second part the paper analyses the main factors that affect the effectiveness of the pass through mechanism, financial dollarization, banking industry concentration, the level of government debt and the Central Bank deficit.

Keywords: PASS-THROUGH; POLICY-RATE; ASYMMETRIC; NON-LINEARITY; DOLLARIZATION; DEBT; BANK CONCENTRATION; EFECTO TRASPASO; TASA DE POLÍTICA MONETARIA; ASIMETRÍA; NO LINEALIDAD; DOLARIZACIÓN; DEUDA INTERNA; CONCENTRACIÓN BANCARIA (search for similar items in EconPapers)
JEL-codes: A (search for similar items in EconPapers)
Date: 2015
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