Traspaso Depreciación-Inflación en México: Análisis de Precios al Consumidor y Productor

Abstract

This paper analyses the exchange rate pass-through to different price indices in Mexico, placing emphasis on the producer prices subdivisions. A VAR model is implemented for the estimations, using a monthly frequency from January 2004 to November 2016. Subsequently, response impulse functions that help measure the impact of the exchange rate shocks on prices are created. The results show that the pass-through elasticity is low for the consumer and producer prices, but it increases in the most recent period. The mining and manufacturing sectors are the sectors that reacted the most to changes in the exchange rate. The fact that the central bank continuously supervises the industries with greater pass-through and verifies its effects on the consumer prices is considered significant. This paper, unlike most others, also analyses producer prices. The results conclude that long periods of depreciation of the Mexican peso do affect the price levels in the economy.

The Financial Conditions Index as an additional tool for policy-makers in developing countries: the Mexican case

“…The opposite occurs following depreciation of the exchange rate; in this case, the cost of imported inputs increases, as does inflation, with the result that domestic producers have the chance to increase their margins while real wages may decrease, thereby worsening income distribution (Palley, 2001). Even if recent studies have found that Mexico's exchange rate pass-through to inflation was statistically significant but close to zero, González and Saucedo (2018) showed that pass-through depends on the economic sector [2] and the coefficient increases according to the selected period [3]. To detect these effects of the exchange rate, we include in our FCI the agriculture raw material index as an alternative to the commodity index.…”