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Competitiveness and the Equilibrium Exchange Rate in Costa Rica

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  • Claudio Paiva

Abstract

This paper evaluates several indicators of external vulnerability and estimates the equilibrium real exchange rate for Costa Rica. While current indicators are mostly positive, declining market shares of domestic exports, the expected decline in foreign direct investment, and the desirability of strengthening the reserve position recommend an improvement in the current account. Costa Rica’s equilibrium real exchange rate is then estimated using the CGER and the FEER methodologies. The overall conclusion is that while there are no signs of serious external vulnerability, the real exchange rate appears to be somewhat overvalued, a situation that would be best addressed through increased fiscal discipline.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 01/23.

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Length: 29
Date of creation: 01 Feb 2001
Date of revision:
Handle: RePEc:imf:imfwpa:01/23

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Keywords: Exchange rates; Export competitiveness; exchange rate; current account; central bank; real exchange rate; current account balance; current account deficit; equilibrium exchange rate; external debt; domestic savings; real effective exchange rate; effective exchange rate; exchange rate movements; current account balances; current account deficits; external financing; public debt; external public debt; exchange rate developments; domestic currency; foreign debt; nominal exchange rate; debt burden; currency crisis; external debt burden; real exchange rates; domestic debt; exchange rate misalignment; private external debt; real exchange rate movements; current account adjustment; debt dynamics; currency devaluation; foreign exchange; exchange rate fluctuations; exchange rate change; prevailing exchange rates; exchange rate variations; public finances; real exchange rate appreciation; exchange rate appreciation;

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Citations

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Cited by:
  1. Cheng, Fuzhi & Orden, David, 2005. "Exchange rate misalignment and its effects on agricultural producer support estimates," MTID discussion papers 81, International Food Policy Research Institute (IFPRI).
  2. Lendjoungou, Francis, 2009. "Competitiveness and the real exchange rate: the standpoint of countries in the CEMAC zone," MPRA Paper 17053, University Library of Munich, Germany.
  3. Eva Gutierrez, 2006. "Export Performance and External Competitiveness in the Former Yugoslav Republic of Macedonia," IMF Working Papers 06/261, International Monetary Fund.
  4. John Cady, 2003. "The Equilibrium Real Exchange Rate of the Malagasy Franc," IMF Working Papers 03/28, International Monetary Fund.
  5. Shumilov, Andrei & Sosunov, Kirill, 2005. "Оценивание Равновесного Реального Обменного Курса Российского Рубля
    [Estimation of the Equilibrium Real Exchange Rate for Russia]
    ," MPRA Paper 42978, University Library of Munich, Germany.
  6. Leon, Jorge & Mendez, Eduardo & Prado, Eduardo, 2003. "El Tipo de Cambio Real de Costa Rica
    [Real Exchange Rate of Costa Rica]
    ," MPRA Paper 44509, University Library of Munich, Germany, revised 2003.
  7. Sosunov, K. & Ushakov, N., 2009. "Determination of the Real Exchange Rate of the Ruble and Assessment of Long-Run Policy of Real Exchange Rate Targeting," Journal of the New Economic Association, New Economic Association, issue 3-4, pages 97-121.
  8. Sossounov, Kirill & Ushakov, Nikolay, 2009. "Determination of the real exchange rate of rouble and assessment of long-rum policy of real exchange rate targeting," MPRA Paper 18549, University Library of Munich, Germany.
  9. Todd Schneider & Nabil Ben Ltaifa & Faisal Ahmed & Saade Chami, 2007. "Yemen," IMF Working Papers 07/5, International Monetary Fund.
  10. Cheng, Fuzhi & Orden, David, 2005. "Exchange Rate Misalignment and Its Effects on Agricultural Producer Support Estimates: Empirical Evidence from India and China," 2005 Annual meeting, July 24-27, Providence, RI 19121, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  11. Aziz Hayat & Bahodir Ganiev & Xueli Tang, 2012. "Expectations of future income and real exchange rate movements," Financial Econometics Series 2012_05, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  12. Hayat, Aziz & Ganiev, Bahodir & Tang, Xueli, 2013. "Expectations of future income and real exchange rate movements," Journal of Banking & Finance, Elsevier, vol. 37(4), pages 1274-1285.
  13. Leon, Jorge & Laverde, Bernal & Duran, Rodolfo, 2002. "Pass Through del Tipo de Cambio en los Precios de Bienes Transables y No Transables en Costa Rica
    [Exchange Rate Pass Through into the Prices of Tradable and Non Tradable Goods in Costa Rica]
    ," MPRA Paper 44527, University Library of Munich, Germany, revised 2002.
  14. Rodrigo Caputo G. & Igal Magendzo, 2009. "Do Exchange Rate Regimes Matter For Inflation And Exchange Rate Dynamics? The Case Of Central America," Working Papers Central Bank of Chile 517, Central Bank of Chile.
  15. Ken Miyajima, 2007. "What Do We Know About Namibia's Competitiveness," IMF Working Papers 07/191, International Monetary Fund.
  16. International Monetary Fund, 2003. "The Equilibrium Real Exchange Rate in a Commodity Exporting Country," IMF Working Papers 03/93, International Monetary Fund.

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