Effectiveness of the Costa Rican Central Bank forex intervention

• Main Authors: Julio César Espinoza Rodríguez, Marco Vinicio Valerio Berrocal
• Format: Article
• Language: English
• Published: Universidad Nacional, Costa Rica 2016-03-01
• Series: Economía y Sociedad
• Subjects: tipo de Cambio; politica monetaria; intervencion del mercado, tipo de cambio de equilibrio
• Online Access: http://www.revistas.una.ac.cr/index.php/economia/article/view/7725

This paper represents an empirical approach to assess the effectiveness of foreign exchange interventions following the criteria by K. Domínguez (1998) using a GARCH model based on the work by C. Broto (2012). Analyses are conducted to evaluate the FOREX rules of intervention followed by the BCCR, and the probability of occurrence of an intervention is estimated using a LOGIT model.  In addition, the paper attempts to analyze what happened to the exchange arrangements applied in Costa Rica as a result of the 2006 exchange rate flexibility and transition to inflation targets.