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Estimation of the neutral real interest rate for Costa Rica

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  • Muñoz-Salas, Evelyn
  • Rodríguez-Vargas, Adolfo

Abstract

A central bank that uses the interest rate as monetary policy instrument requires an estimation of the neutral real interest rate (NRIR) that allows it to define the monetary policy stance to achieve its inflation target. This paper estimates the NRIR from actual values of the Monetary Policy Rate (TPM) for Costa Rica for the first time. This rate was established by the Central Bank of Costa Rica as its instrument for monetary control on June 2011. On the basis of monthly data from 2002-2015 and combining estimates from several methodologies, we estimate the neutral real interest rate for Costa Rica to be around 1,4%.

Suggested Citation

  • Muñoz-Salas, Evelyn & Rodríguez-Vargas, Adolfo, 2017. "Estimation of the neutral real interest rate for Costa Rica," Revista de Ciencias Económicas, Instituto de Investigaciones en Ciencias Económicas, Universidad de Costa Rica, vol. 35(2), July.
    • Handle: RePEc:rce:rvceco:31746
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    References listed on IDEAS

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    1. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
    2. Michał Brzoza-Brzezina, 2002. "Estimating the Natural Rate of Interest: A SVAR Approach," NBP Working Papers 27, Narodowy Bank Polski.
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    More about this item

    Keywords

    MONETARY POLICY; INFLATION; UNOBSERVABLE VARIABLES; POLÍTICA MONETARIA; INFLACIÓN; VARIABLES NO OBSERVABLES;
    All these keywords.

    JEL classification:

    • A - General Economics and Teaching

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