Policy Rate Pass-Through: Evidence from Costa Rica

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

No 1801, Documentos de Trabajo from Banco Central de Costa Rica

Abstract: I quantify the policy rate pass-through to the two money markets that operate in Costa Rica (MIL and MEDI) so it can be assessed whether the pass-through differ among those markets. To that end I employ Structural Vector Autoregression models based upon which Granger causality tests and impulse-response functions are estimated. I found evidence that shocks to policy rate have significant and fast impact on the interest rate of the MIL market. This is not the case of the MEDI market for which I was not able to find evidence that its interest rate reacts to TPM shocks. Such results support the implementation of policy actions that help to integrate the two money markets so that monetary policy transmission in enhanced. *** Resumen: Se cuantifica la transmisión de la tasa de política monetaria (TPM) a las tasas de los mercados de dinero que funcionan en Costa Rica (MIL y MEDI) para determinar si tal transmisión difiere entre ambos mercados. Se estiman modelos estructurales de vectores autoregresivos con base en los cuales se efectúan pruebas de causalidad de Granger y funciones de respuesta al impulso. Los resultados indican que los choques sobre la TPM se transmiten rápida y significativamente a la tasa del MIL, no así en el caso del MEDI donde no se encuentra evidencia de que la tasa de interés tenga una respuesta significativamente distinta de cero. Estos resultados justifican la implementación de medidas de política que coadyuven a integrar los dos mercados de dinero existentes para mejorar el mecanismo de transmisión de la política monetaria.

Keywords: Policy rate; Money markets; SVAR, Tasa de política, Mercados de dinero. (search for similar items in EconPapers)
JEL-codes: E43 E44 E52 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2019-07
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Persistent link: https://EconPapers.repec.org/RePEc:apk:doctra:1801

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