When Do Costa Rica National Banks Respond to Reserve Requirement Changes?
The International Journal of Business and Finance Research, Vol. 6, No. 3, 2012
13 Pages Posted: 28 Mar 2012 Last revised: 5 Apr 2012
Date Written: March 28, 2012
The process of changing reserve requirements in Costa Rica is a three step process. First the central bank makes the decision to change reserve requirements. Several days to several weeks later, the change is announced in the official newspaper. The actual reserve requirement change takes place from several weeks to several months later. Previous studies have limited their analysis to an examination of the decision and the announcement dates. The research shows that Costa Rica national banks do not respond to reserve requirement change announcements or reserve requirement change decisions. In this paper we examine the extent to which Costa Rica national banks respond to reserve requirement changes on the effective day of the reserve requirement change. We find evidence that Costa Rica national banks change their interest rate spreads on the effective day.
Keywords: Banking, Costa Rica, Reserve Requirement Changes, Interest Rates
JEL Classification: E42, E58
Suggested Citation: Suggested Citation