Cover -- CONTENTS -- I. SELECTED REAL SECTOR ISSUES -- A. Potential Output Estimates -- B. Estimating the Impact of Intel Exit -- C. Labor Markets and Inequality -- D. Electricity sector -- References -- BOX -- 1. Methodologies for Potential Output Estimates -- TABLE -- 1. Potential Output Growth and Output Gap Estimates -- II. CROSS-BORDER LINKAGES AND SPILLOVERS -- A. Trade Linkages -- B. Real Growth Spillovers -- C. Fiscal Spillovers -- D. Financial Spillovers -- E. Monetary Policy Spillovers (the Effect of U.S. Monetary Policy Normalization) -- References -- FIGURES -- 1. Trade Linkages -- 2. Costa Rica and Selected Trading Partners-full title -- 3. United States: Three Scenarios of Tapering Off (FSGM simulations) -- 4. The Impact of U.S. Tapering Off (FSGM simulations) -- TABLE -- 1. Vulnerability Indicators -- III. ASSESSING FISCAL VULNERABILITY AND MEDIUM-TERM SUSTAINABILITY -- References -- FIGURE -- 1. Long-Term Fiscal Sustainability -- IV. THE CENTRAL BANK NET'S WORTH -- A. Introduction -- B. Baseline Simulation Results -- C. Sensitivity Analysis -- References -- BOX -- 1. Balance Sheet Equations -- FIGURE -- 1. Central Bank of Costa Rica: Sensitivity Analysis -- V. MONETARY POLICY AND INFLATION -- A. Monetary Policy Stance -- B. Pass-through from Exchange Rate Depreciation to Inflation -- References -- VI. TRANSITION TO A FLEXIBLE EXCHANGE RATE: LESSONS FROM PAST EXPERIENCE -- A. Background -- B. Dangers of Exchange Rate Inflexibility and the Advantages of Flexibility -- C. Moving Toward Exchange Rate Flexibility: Experiences and Lessons from Other Countries -- D. Assessing Costa Rica's Preparedness to Float -- References -- FIGURE -- 1. Historical Experiences with Transitions to Exchange Rate Flexibility -- TABLE -- 1. Extent of Preparedness for Transitioning to Greater Flexibility: Before the Full Float.

VII. FINANCIAL SECTOR ISSUES -- A. Strengthening Bank Capital and Liquidity in Central America: The Road to Basel III -- B. Balance Sheet Analysis -- References -- FIGURE -- 1. Gross Financial Assets and Liabilities of Economic Sectors -- TABLES -- 1. External and Foreign Currency Positions -- 2. Net Foreign Currency Debt Position and Exchange Rate Shocks -- ANNEXES -- I. Net Intersectoral Asset and Liability Positions -- II. Bank Heat Maps.