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The Transmission of the Monetary Policy Rate in Costa Rica, 2018-2024

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  • Jose Pablo Barquero-Romero

    (Department of Economic Research, Central Bank of Costa Rica)

Abstract

This study follows the monetary approach to estimate the pass-through of the Monetary Policy Rate (MPR) of the Central Bank of Costa Rica to market interest rates, liquidity markets and the yield curve. Cointegration, error correction vector and autoregressive vector models are used. Unlike previous studies on this topic, this research uses weekly data on negotiated active interest rates according to economic activity, and negotiated deposit rates, classified by deposit term. The results show that the pass-through of the MPR to active and passive interest rates is heterogeneous and incomplete; in addition, the speed of the pass-through is greater than that shown in previous studies. In general, it is confirmed that the pass-through is faster to passive rates than to active rates. It is found that, for consumer rates, the pass-through is not statistically significant, while towards passive rates the transfer is stronger and faster in the terms of greater demand. Este estudio sigue el enfoque monetario para estimar el traspaso de la Tasa de Política Monetaria (TPM) del Banco Central de Costa Rica a las tasas de interés del sistema financiero, los mercados de liquidez y la curva de rendimiento. Se utilizan modelos de cointegración, de vectores de corrección de errores y vectores autorregresivos. A diferencia de estudios previos sobre este tema, en esta investigación se utilizan datos semanales de las tasas de interés activas negociadas según actividad económica, y de las tasas pasivas negociadas, clasificadas por plazo del depósito. Los resultados muestran que el traspaso de la TPM hacia las tasas de interés activas y pasivas es heterogéneo e incompleto; además, se evidencia una mejora en la velocidad de la transmisión si se le compara con estudios anteriores. En general, se confirma que el traspaso es más rápido hacia las tasas pasivas que a las tasas activas. Se encuentra que, para las tasas de consumo el traspaso no es estadísticamente significativo; en tanto que hacia las tasas pasivas el traspaso es más fuerte y rápido en los plazos con mayor demanda.

Suggested Citation

  • Jose Pablo Barquero-Romero, 2024. "The Transmission of the Monetary Policy Rate in Costa Rica, 2018-2024," Notas Técnicas 2406, Banco Central de Costa Rica.
    • Handle: RePEc:apk:nottec:2406
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    File URL: https://repositorioinvestigaciones.bccr.fi.cr/handle/20.500.12506/496.2
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    References listed on IDEAS

    as
    1. Alessandro Maravalle & Alberto González Pandiella, 2022. "The pass-through of the monetary policy rate into lending rates in Mexico," OECD Economics Department Working Papers 1734, OECD Publishing.
    2. Gregor, Jiří & Melecký, Martin, 2018. "The pass-through of monetary policy rate to lending rates: The role of macro-financial factors," Economic Modelling, Elsevier, vol. 73(C), pages 71-88.
    3. Ms. Stephanie C Medina Cas & Mr. Alejandro Carrion-Menendez & Ms. Florencia Frantischek, 2011. "The Policy Interest-Rate Pass-Through in Central America," IMF Working Papers 2011/240, International Monetary Fund.
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    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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