Competitiveness and the Equilibrium Exchange Rate in Costa Rica

February 1, 2001

Preview Citation

Format: Chicago

Claudio A Paiva. Competitiveness and the Equilibrium Exchange Rate in Costa Rica, (USA: International Monetary Fund, 2001) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Balance of payments, Current account, Current account deficits, Exchange rates, External debt, Foreign exchange, Real exchange rates

Keywords: Central bank of Costa Rica, Competitiveness, Costa Rica colón, Current account, Current account deficits, Current account sustainability, Current account upturn, Equilibrium exchange rate, Equilibrium real effective exchange rate, Exchange rate, Exchange rate movement, Exchange rates, Export base, External vulnerability, FDI inflow, GDP, Real exchange rates, WP

Publication Details

Pages:

29
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2001/023
Stock No:

WPIEA0232001
ISBN:

9781451844047
ISSN:

1018-5941

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