Monetary policy rules in a small open economy: an application to Mexico
AbstractWe estimate a small-scale macro model for the Mexican economy under the New Keynesian (NK) framework and alternative interest rate rules for Mexico. With these results we evaluate the performance of the Bank of Mexico against a set of optimality principles derived in the NK literature. Our system estimation results show that the Bank of Mexico holds a preference for stabilizing not only inflation around target, but also acts to achieve an output gap close to zero. Furthermore, we find that the central bank responds non-linearly to real exchange rate depreciations. We also find that the central bank has actively attempted to neutralize demand and supply shocks through monetary policy that is consistent with the Taylor principle.
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Bibliographic InfoArticle provided by Universidad del CEMA in its journal Journal of Applied Economics.
Volume (Year): XV (2012)
Issue (Month): (November)
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More information through EDIRC
Taylor Rule; New Keynesian; monetary policy; interest rate rules; small open economy;
Other versions of this item:
- Villagómez, F. Alejandro & Orellana Polo, Javier, 2009. "Monetary policy rules in a small open economy: An application to Mexico," EGAP Working Papers 2009-01, Tecnológico de Monterrey, Campus Ciudad de México.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- PolÃtica Monetaria en MÃ©xico y Reglas de Taylor
by Alejandro Villagomez in Tintero Económico Diario on 2012-11-22 00:07:00
- Banxico y la Posible ReducciÃ³n en su Tasa de Referencia
by Alejandro Villagomez in Tintero Económico Diario on 2013-03-08 02:40:00
- Entendiendo la DecisiÃ³n de Banxico
by Alejandro Villagomez in Tintero Económico Diario on 2014-02-01 00:39:00
- Banxico reduce su Tasa a 3%: Â¿Medida Correcta, Oportuna y Efectiva?
by Alejandro Villagomez in Tintero Económico Diario on 2014-06-07 14:27:00
- Villarreal, Francisco G., 2014. "Monetary Policy and Inequality in Mexico," MPRA Paper 57074, University Library of Munich, Germany.
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