A Note on the Volatilities of the Interest Rate and the Exchange Rate Under Different Monetary Policy Instruments: Mexico 1998-2008
Abstract
To advance our understanding of the mechanisms through which monetary policy affect the economy, in this note we analyze the volatilities of the Mexican short-term interest rate and of the peso-Dollar exchange rate under two monetary policy instruments: a non-borrowed reserves requirement target (the "Corto") and an interest rate target. Using tests for multiple structural changes, we document that both volatilities decreased around the time Banco de México started the transition from the former to the latter. With respect to the volatility transmission from interest rates to exchange rates and vice versa, we find, using a bivariate GARCH model and causality-in-variance tests, bi-causality during the period of the Corto, but no causal relation after the transition started.Download Info
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Paper provided by Banco de México in its series Working Papers with number 2009-10.Length:
Date of creation: Oct 2009
Date of revision:
Handle: RePEc:bdm:wpaper:2009-10
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Web page: http://www.banxico.org.mx
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Related research
Keywords: Corto; granger causality; multiple structural breaks; multivariate volatility.;Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-24 (All new papers)
- NEP-CBA-2009-10-24 (Central Banking)
- NEP-MON-2009-10-24 (Monetary Economics)
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Hernandez, Manuel A. & Gardebroek, Cornelis, 2012.
"Do energy prices stimulate food price volatility? Examining volatility transmission between US oil, ethanol and corn markets,"
2012 Annual Meeting, August 12-14, 2012, Seattle, Washington
124583, Agricultural and Applied Economics Association.
- Gardebroek, Cornelis & Hernandez, Manuel A., 2012. "Do energy prices stimulate food price volatility? Examining volatility transmission between US oil, ethanol and corn markets," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122476, European Association of Agricultural Economists.
- Hernandez, Manuel A. & Ibarra, Raul & Trupkin, Danilo R., .
"How far do shocks move across borders? Examining volatility transmission in major agricultural futures markets,"
2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil
124979, International Association of Agricultural Economists.
- Manuel Hernandez & Raul Ibarra & Danilo Trupkin, 2011. "How far do shocks move across borders?Examining volatility transmission in major agricultural futures markets," Documentos de Trabajo/Working Papers 1109, Facultad de Ciencias Empresariales y Economia. Universidad de Montevideo..
- Hernandez, Manuel A. & Ibarra, Raul & Trupkin, Danilo R., 2012. "How far do shocks move across borders? Examining volatility transmission in major agricultural futures markets," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122511, European Association of Agricultural Economists.
- Manuel A. Hernández & Raúl Ibarra-Ramírez & Danilo R. Trupkin, 2011. "How Far Do Shocks Move Across Borders? Examining Volatility Transmission in Major Agricultural Futures Markets," Working Papers 2011-15, Banco de México.
- Hernandez, Manuel A. & Ibarra, Raul & Trupkin, Danilo R., 2011. "How far do shocks move across borders?: Examining volatility transmission in major agricultural futures markets," IFPRI discussion papers 1109, International Food Policy Research Institute (IFPRI).
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