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Exchange rate regime, world oil prices and the Mexican economy

Author

Listed:
  • Merve Osmanbeyoglu

    (Bilkent University)

  • Nukhet Dogan

    (Ankara Hacı Bayram Veli University)

  • M. Hakan Berument

    (Bilkent University)

Abstract

This paper studies the effects of the exchange rate regime of the Mexican economy on how the oil price shocks affect the domestic economic performance by considering the period from January 1992 to December 2019. The empirical evidence reported here reveals that a positive oil price shock appreciates the local currency, increases interest rates, output, and prices. However, once the exchange rate channel is closed, the interest rate increases, and prices will be higher. However, we could not find any statistically significant evidence of the effect on output changes with the exchange rate regime. Thus, the flexible exchange rate regime may promote price stability when the Mexican economy faces an oil price shock.

Suggested Citation

  • Merve Osmanbeyoglu & Nukhet Dogan & M. Hakan Berument, 2022. "Exchange rate regime, world oil prices and the Mexican economy," International Journal of Economic Policy Studies, Springer, vol. 16(1), pages 159-178, February.
    • Handle: RePEc:spr:ijoeps:v:16:y:2022:i:1:d:10.1007_s42495-021-00072-3
    DOI: 10.1007/s42495-021-00072-3
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    References listed on IDEAS

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    More about this item

    Keywords

    Oil price shocks; Exchange rate channel; Vector autoregressive models;
    All these keywords.

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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