Monetaria, volume VI, number 1, January-June 2018

Monetaria, volume VI, number 1, January-June 2018
full Publication | PDF format | Size 4.7 MB


Asymmetries of the Exchange Rate Pass-through to Domestic Prices in Costa Rica during the Exchange Rate Flexibility Period
Carlos Brenes Soto and Manfred Esquivel Monge


This article analyses the exchange rate pass-through to domestic prices in Costa Rica during the current exchange rate flexibility period and tests whether there is evidence of asymmetry. To this end, we estimate structural distributed lag models that encompass symmetric and asymmetric data generating process in line with Kilian and Vigfusson (2011). We found evidence of sign asymmetry in the bivariate relationship between inflation and exchange rate and when controlling for interest rate differential and output gap.


Keywords: pass-through asymmetry, exchange rate, exchange rate flexibility.

JEL classification: E31, E37, E58.


Corporate Firms’ Financial Conditions and Investment in Latin America: Determinants and Measurement
Óscar Carvallo Valencia, Jonathan Barboza Pineda, and Ignacio Garrón Vedia


For our research, we used a large dataset of nonfinancial firms from ten Latin American countries to assess leverage determinants and their dynamics. The results seem to be consistent with elements of both the trade-off and pecking order views. Also, the regression results show the presence of significant adjustment costs. According to our results, a firm’s leverage is significantly reduced in the face of rising interest rates, with feed-back effects. Furthermore, we observed that reducing tangible assets induces more volatility in the interest rates paid by firms in the future. Essentially, when we separate firms according to leverage level, it appears that these effects are stronger for the highly leveraged enterprises. Dynamically, in the case of increasing rates, there seems to be more risk associated with higher leverage. Our results show that this effect is manifested in higher volatility of interest rates and reduced collateral levels, potential asset liquidation and rapid deleveraging. The segments most likely affected are medium size firms and large firms with high costs of liquidation and high sunk costs, especially in the service sector. Firms operating in markets with unique products would also suffer. Traditional market-based indexes of financial conditions could be complemented by corporate indicators underlying the role of collateral, cash flows, and risk. Based on these findings we propose and calculate an index of corporate financial conditions for the region.


Keywords: corporate finance; Latin American firms, pecking order, trade-off theory, financial distress.

JEL classification: G3, G30, G31.


The Demand for Credit at the Individual Level: The Credit Registry (RCC) Meets the National Household Survey (ENAHO)
Nikita Céspedes Reynaga


This article examines the demand for credit at the individual level in Peru. It uses a unique database resulting from merging the Credit Registry (RCC) and the National Household Survey (ENAHO). The data allows for ideally identifying the amount of credit and the interest rate as well as the characteristics of each credit granted in the Peruvian banking system. It also includes indicators of the supply of each credit, which is key for the identification of demand. The elasticity of the demand for credit relative to the interest rate is estimated using a two-step procedure proposed by Heckman (1979) and is approximately –0.29. This value means that a rise in the market interest rate by 1% implies a reduction in the demand for credit by 0.29%. This elasticity is slightly lower than the one provided by international evidence and is highly heterogeneous throughout credit types and features of individual debtors.


Keywords: demand for credit, balance sheet effect, heterogeneity.

JEL classification: E21, E44, E51, E52.


Inventory Adjustments to Demand Shocks under Flexible Specifications
Carlos R. Barrera Chaupis


The relations among growth rates in GDP and four aggregate demand components associated with inventory management are approximated by a neural var model with t-Student disturbances and an ARCH covariance matrix. The estimation sample corresponds to Peru’s market-based growth experience (1993Q1-2010Q1). The main finding is that a positive shock to private demand growth will contemporaneously generate a more than proportional increase in production growth. This amplifier impact effect is consistent with the cycle of inventories and the average incidence of the inventory investment growth inside the production growth during the last four recessions.


Keywords: time series models, neural networks, inventories, production smoothing, business fluctuations.

JEL classification: C32, C45, E22, E23, E32.