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Competitiveness and the Equilibrium Exchange Rate in Costa Rica
Author:
Mr. Claudio A Paiva
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Series:
IMF Working Papers
Volume/Issue:
Volume 2001: Issue 023
Language:
English
Publication Date:
01 Feb 2001
DOI:
https://doi.org/10.5089/9781451844047.001
ISBN:
9781451844047
ISSN:
1018-5941
Pages:
29
Keywords:
WP; exchange rate; GDP; Equilibrium exchange rate; current account sustainability; competitiveness; external vulnerability; central bank of Costa Rica; export base; equilibrium real effective exchange rate; Costa Rica colón; FDI inflow; exchange rate movement; current account upturn; Real exchange rates; Exchange rates; Current account deficits; Current account
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund