The Transmission of Monetary Policy in Costa Rica, 2011–2022

January 2024 · With Daniel Aguilar — work in progress.

monetary policy transmission
structural VAR
impulse response functions
inflation expectations
Costa Rica

Abstract

VAR-based structural analysis of how the monetary policy rate transmitted to prices and output during a period of institutional reform at the Central Bank of Costa Rica — including adoption of the Monetary Policy Rate and a transition to flexible exchange rate regimes.

Conclusions

The policy rate has significant effects on prices but not on output, consistent with money neutrality.
Inflation expectations are revised upward in response to contractionary signals, suggesting an information channel in the central bank's rate decisions.

Materials

Draft, in Spanish (PDF)Annotated code

Code

Stata