This document illustrates the inflows of capital to a small and open economy such as Costa Rica using the Metzler Diagram. The simplicity of the Metzler Diagram provides clarity to understand the motivation for the inflows of capital, as well as a framework to analyze the policy options...

This paper estimates Costa Rica’s Equilibrium Real Exchange Rate (ERER) using quarterly data from 1991 to 2003. Cointegration and Unit Root tests are used to determine if the Purchasing Power Parity (PPP) applies. The results show that PPP does not stand. The ERER is an unobservable variable;...

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...

This paper estimates a medium-term forecasting model for the headline inflation of Costa Rica, utilizing disaggregate data from the components of the Consumer Price Index (CPI). The period used for the estimation is characterize by a process of reduction of inflation and stabilized around the...

Several recent papers argue that contracts provide reference points that affect ex post behavior. We test this hypothesis in a canonical buyer-seller relationship with renegotiation. Our paper provides causal experimental evidence that an initial contract has a highly significant and...

We present an international trade model with multiproduct firms. Firms are heterogeneously endowed with two types of capabilities that jointly determine the trade-off within firms between managing a large portfolio of products and producing at low marginal cost. The model can explain many of the...

This paper reports data from a laboratory experiment on two-period moral hazard problems. The findings corroborate the contract-theoretic insight that even though the periods are technologically unrelated, due to incentive considerations principals can benefit from offering long-term contracts...