Pass Through del Tipo de Cambio en los Precios de Bienes Transables y No Transables en Costa Rica

This paper estimates short run and long run coefficients of exchange rate pass through in to the prices of tradable and non-tradable goods in Costa Rica. The coefficients are estimated by OLS. A VAR analysis is conducted in order to estimate the dynamic process between exchange rate and inflation. Granger causality test and a stability test are conducted too. The short run pass through coefficients are 13% and 10%, for tradable and non-tradable goods respectively and the long run coefficients are 68% and 52% in the same order. There is a second stage pass through of 7% included in the long run coefficient for non-tradable goods. The dynamic analysis shows that the adjustment process of prices as a result of an exchange rate shock takes 17 months for tradable goods and 27 months for non-tradable goods. The Granger causality test shows precedence between variation in the exchange rate and inflation, and between the prices of tradable and non-tradable goods. There is statistical evidence of a structural change in the non-tradable model between the end of 1995 and the beginning of 1996.