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Competitiveness and the Equilibrium Exchange Rate in Costa Rica

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  • Claudio A 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.

Suggested Citation

  • Claudio A Paiva, 2001. "Competitiveness and the Equilibrium Exchange Rate in Costa Rica," IMF Working Papers 01/23, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:01/23
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    Citations

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    Cited by:

    1. Сосунов К. А. & Шумилов А. В., 2005. "Оценивание Равновесного Реального Обменного Курса Российского Рубля," Higher School of Economics Economic Journal Экономический журнал Высшей школы экономики, CyberLeninka;Федеральное государственное автономное образовательное учреждение высшего образования «Национальный исследовательский университет «Высшая школа экономики», vol. 9(2), pages 216-229.
    2. 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.
    3. 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.
    4. 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.
    5. 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).
    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. Todd Schneider & Nabil Ben Ltaifa & Faisal Ahmed & Saade Chami, 2007. "Yemen; Exchange Rate Policy in the Face of Dwindling Oil Exports," IMF Working Papers 07/5, International Monetary Fund.
    8. Ken Miyajima, 2007. "What Do We Know About Namibia’s Competitiveness?," IMF Working Papers 07/191, International Monetary Fund.
    9. Eva Gutierrez, 2006. "Export Performance and External Competitiveness in the former Yugoslav Republic of Macedonia," IMF Working Papers 06/261, International Monetary Fund.
    10. 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.
    11. International Monetary Fund, 2003. "The Equilibrium Real Exchange Rate in a Commodity Exporting Country; The Case of Russia," IMF Working Papers 03/93, International Monetary Fund.
    12. 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).
    13. 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.
    14. John Cady, 2003. "The Equilibrium Real Exchange Rate of the Malagasy Franc; Estimation and Assessment," IMF Working Papers 03/28, International Monetary Fund.
    15. 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.

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