Central Bank Policies in Mexico: Targets, Instruments, and Performance

Ros, Jaime

doi:10.1057/ces.2015.6

Cited by 12 publications

(13 citation statements)

References 34 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…This evidence is consistent with Barbosa-Filho (2015) and Ros (2015), and it contrast with the work of Pontines and Siregar (2012), who find that East Asian countries using Inflation Targeting display "fear of floating in reverse" or "fear of appreciation". 25 Constant -0.0061*** 0.0057*** -0.0054* 0.0033* 0.0077*** (0.0038) (0.0033) (0.0029) (0.0015) (0.0020) Inflationgap (t-1) 0.0019** -0.0003* 0.0006 -0.0077** -0.0057*** (0.0009) (0.0013) (0.0004) (0.0030) (0.0020) Outputgap (t-1) 0.0009 0.0029** 0.0002 0.0011*** 0.0028*** (0.0008) (0.0013) (0.0002) (0.0004) (0.0008) ∆ln(XR) (t-1) 0.…”

Section: Discussionsupporting

confidence: 89%

“…There are good reasons to believe that this type of intervention was not implemented during episodes of appreciation and depreciation with the same intensity. Authors such as Barbosa-Filho (2015) and Ros (2015) have argued that the Central Banks of Brazil and Mexico have conducted an "asymmetric policy", tightening the stance of monetary policy too much when inflation accelerates, and softening it too little when inflation falls. Because the capital account of the balance of payments was extremely open, the required changes in the interest rate may have triggered movements in the exchange rate with a bias in the downward direction.…”

Section: Introductionmentioning

confidence: 99%

“…This tends to make monetary policy pro-cyclical in the fact of external shocks. For example, in the face of a negative export demand shock, which tends to lower economic activity, the monetary authority tends to moderate the pressure towards depreciation through an increase in interest rates which aggravates the recession", (Ros, 2015). remains constant in the long-run, but it can increase to 1.5, and decrease to 0.5, due to shocks if the Central Banks refrains from intervening in the foreign exchange market.…”

Section: Introductionmentioning

confidence: 99%

“…The next sections will analyze the behavior of the exchange rate in the main Latin-American countries using Inflation Targeting during the last 15 years. 9 The main questions are the following: are authors such as Barbosa-Filho (2015) and Ros (2015) Transition Autoregressive Model with three regimes (and two transition thresholds), and a Markov Switching model. These two models will estimate the upper and the lower bound of an exchange rate band, and the transition probabilities for different "regimes" (appreciations and depreciations), respectively, for the rate of change of the exchange rate.…”

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Asymmetric monetary and exchange-rate policies in Latin American countries that use inflation targeting

Libman¹

2019

CEPAL Review

View full text Add to dashboard Cite

During the last decades, the number of countries that adopted more flexible exchange rate regimes, in particular Inflation Targeting, has been increasing steadily. Latin-America was no exception. Some authors have argued that there is a flaw in the way in which the system has been conducted in the region.When inflation falls, the Central Bank is reluctant to cut interest rates, but when inflation increases, the Central Bank is willing to raise interest rates very aggressively, adding an unnecessary bias to monetary and exchange rate policies. This paper analyzes the asymmetry of monetary and exchange rate policies in the five largest Latin-American Inflation Targeting countries, Brazil, Chile, Colombia, Mexico, and Peru. Using different econometric techniques, I find that the Central Banks, with the exception of Chile, suffer from "fear of floating". This is a more pronounced phenomena for the case of Brazil and Mexico, as the literature has argued. JEL Classification Codes: E58, F30, F43.Markov-Switching Models, GMM, STAR Models.2 my econometric estimation is to test for the presence of asymmetries in the evolution of the exchange rate.But because exchange rate may behave asymmetrically for reasons other than policy, I also estimate a set of Central Bank reaction functions for interest rates and reserve accumulation, to determine the impact of monetary and exchange rate policy on the observed exchange rate behavior.A brief summary of my results is as follows: there are some signs that the Central Banks from Latin-America dislike depreciations more than appreciations, with the exception of Chile. Moreover, this behavior seems to be more pronounced for the cases discussed by Barbosa-Filho and Ros, Brazil and Mexico. This paper is structured as follows. After this introduction, section 3.2 comments on the related literature. Section 3.3 describes the econometric techniques and presents the results. Finally, section 3.4 concludes. Related LiteratureThe recent thinking in macroeconomics have converged on a sort of synthesis, known as the "New Consensus Macroeconomics". This consensus agrees on the desirability of an autonomous monetary policy, and how to conduct it. The interest rate has replaced monetary aggregates on the monetary policy rules. It has been shown that a fully microfounded model based on a representative and forward looking agent framework is able to determine the equilibrium without any reference to the quantity of money, provided that the interest rate rule is sufficiently sensitive to changes in the rate of inflation. This is known as the "Taylor-Principle", and it is embodied in the famous "Taylor-Rule". 2 Intuitively, the principle says that the rate of interest should be increased by more than inflation when inflation increase above the inflation target, to avoid a feedback from higher inflation to lower real interest rates, and from lower real interest rates to more aggregate demand and higher inflation. Conversely, when inflation falls below the target, the interest rate should be reduced by m...

show abstract

Section: Discussionsupporting

confidence: 89%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Asymmetric monetary and exchange-rate policies in Latin American countries that use inflation targeting

Libman¹

2019

CEPAL Review

View full text Add to dashboard Cite

show abstract

“…Hay buenos motivos para creer que este tipo de intervención no se ha llevado a cabo con la misma intensidad durante los episodios de apreciación y los de depreciación. Por ejemplo, hay autores como Barbosa-Filho (2015) y Ros (2015) que sostienen que los bancos centrales del Brasil y México han llevado adelante una "política monetaria asimétrica", mediante la cual se ajusta demasiado cuando la economía está en auge y no se afloja lo suficiente cuando surgen presiones deflacionarias. Dado que la cuenta de capital de la balanza de pagos de esos países era muy abierta, la variación implícita de la tasa de interés desencadenó movimientos del tipo de cambio que tenían un sesgo descendente 2 .…”

Section: Introductionunclassified

Política monetaria y cambiaria asimétrica en países latinoamericanos que usan metas de inflación

Libman¹

2018

Revista De La CEPAL

View full text Add to dashboard Cite

Política monetaria y cambiaria asimétrica en países latinoamericanos que usan metas de inflación Emiliano LibmanResumen En los últimos decenios, en los países de América Latina se han adoptado regímenes cambiarios más flexibles y se han fijado metas de inflación. Varios autores sostienen que la política monetaria y cambiaria de algunos países adolece de un sesgo procíclico en virtud del cual los bancos centrales son reacios a reducir las tasas de interés cuando se desacelera la inflación, pero están dispuestos a aumentarlas cuando esta aumenta. Por consiguiente, el tipo de cambio tiende a apreciarse mucho y depreciarse poco. En este documento se analiza la asimetría de la política monetaria y cambiaria de los cinco países más grandes de América Latina en que se usan metas de inflación: Brasil, Chile, Colombia, México y Perú. Se utilizan técnicas econométricas no lineales para mostrar que, salvo posiblemente en Chile y el Perú, existe "miedo a flotar", y que los síntomas son más pronunciados en el Brasil y México. Palabras clavePolítica monetaria, tipos de cambio, inflación, modelos econométricos, estudios de caso, América Latina, Brasil, Chile, Colombia, México, Perú Clasificación JEL E58, F30, F43Autor Emiliano Libman es Investigador del Centro de Investigaciones Macroeconómicas para el Desarrollo (CIMaD) y Docente de Macroeconomía Superior en la Escuela de Economía y Negocios de la Universidad Nacional de San Martín, Argentina. Correo electrónico: emilianolibman@gmail.com.Cuando se satisface el principio de Taylor, las expectativas inflacionarias quedan ancladas a la meta de inflación. Además, si no hay fricciones reales, estabilizar la inflación también trae como consecuencia estabilizar la brecha del producto. Esta es la coincidencia divina que mencionan Blanchard y Gali (2007).

show abstract

Is fiscal policy coordination desirable for a monetary union? An assessment from the perspective of a small open economy

Cabral¹,

Díaz²

2015

Investigación Económica

View full text Add to dashboard Cite

Motivated by the recent experience of Greece and other relatively small European Monetary Union members, this paper examines the appeal of taking part in a large monetary union from the perspective of small open economies. We show that in the absence of fiscal policy considerations, taking part in a large monetary union is counterproductive for a small economy. Nevertheless, once the role of fiscal policy is properly incorporated, taking part in the monetary union becomes desirable from a social perspective. Following these results, we explore the prospects of engaging both economies in fiscal coordination and on how different schemes of policy synchronization can provide the grounds to make cooperation beneficial for the members of a monetary union. We find that when monetary and fiscal authorities cooperate and attempt to exploit externalities for their own benefit, a Pareto efficient outcome can be achieved if fiscal policy in the monetary union is coordinated by a central authority and such authority acts as a the Stackelberg leader vis-à-vis the central bank. Our analysis suggests that this regime

show abstract

Central Bank Policies in Mexico: Targets, Instruments, and Performance

Cited by 12 publications

References 34 publications

Asymmetric monetary and exchange-rate policies in Latin American countries that use inflation targeting

Asymmetric monetary and exchange-rate policies in Latin American countries that use inflation targeting

Política monetaria y cambiaria asimétrica en países latinoamericanos que usan metas de inflación

Is fiscal policy coordination desirable for a monetary union? An assessment from the perspective of a small open economy

Contact Info

Product

Resources

About