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Anchoring of Inflation Expectations after Adverse Supply Shocks

Author

Listed:
  • Ana María Aguilar Argaez

    (Banco de México)

  • Gabriel Cuadra

    (Banco de México)

  • Claudia Ramírez Bulos

    (Banco de México)

  • Daniel Sámano Peñaloza

    (Banco de México)

Abstract

In order to create an environment of low and stable inflation in Mexico it has been necessary to generate a framework for the conduction of monetary policy focused on preserving an environment of price stability along with fiscal discipline. In this context, this paper describes some structural achievements to control inflation that have been attained in Mexico. In addition, it shows empirical evidence in favor of the anchoring of inflation expectations, particularly those for the médium and long term, being recently strengthened. It presents an analysis considering three episodes in which inflation in Mexico was subject to different supply shocks, and it finds that of the episodes analyzed, which were within the period 2004-2012, it was during the episode observed in 2012 when inflation expectations showed greater stability, which suggests a strengthening of the credibility of the Bank of Mexico’s commitment to price stability.

Suggested Citation

  • Ana María Aguilar Argaez & Gabriel Cuadra & Claudia Ramírez Bulos & Daniel Sámano Peñaloza, 2014. "Anchoring of Inflation Expectations after Adverse Supply Shocks," Monetaria, Centro de Estudios Monetarios Latinoamericanos, CEMLA, vol. 0(1), pages 49-81, January-J.
  • Handle: RePEc:cml:moneta:v:ii:y:2014:i:1:p:49-81
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    References listed on IDEAS

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    1. Andrew Powell & Rodrigo Mariscal & Pilar Tavella, 2018. "On the Credibility of Inflation-Targeting Regimes in Latin America," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 1-24, May.
    2. Refet S Gürkaynak & Andrew Levin & Eric Swanson, 2010. "Does Inflation Targeting Anchor Long-Run Inflation Expectations? Evidence from the U.S., UK, and Sweden," Journal of the European Economic Association, MIT Press, vol. 8(6), pages 1208-1242, December.
    3. Rodrigo Mariscal & Andrew Powell & Pilar Tavella, 2014. "On the Credibility of Inflation Targeting Regimes in Latin America," IDB Publications (Working Papers) 86253, Inter-American Development Bank.
    4. Carlos Capistr¡N & Manuel Ramos-Francia, 2010. "Does Inflation Targeting Affect the Dispersion of Inflation Expectations?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(1), pages 113-134, February.
    5. Frederic S. Miskin & Klaus Schmidt-Hebbel, 2007. "Monetary Policy under Inflation Targeting: An Introduction," Central Banking, Analysis, and Economic Policies Book Series, in: Frederic S. Miskin & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Monetary Policy under Inflation Targeting, edition 1, volume 11, chapter 1, pages 001-022, Central Bank of Chile.
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    Citations

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    Cited by:

    1. Kochen Federico & Sámano Daniel, 2016. "Price-Setting and Exchange Rate Pass-Through in the Mexican Economy: Evidence from CPI Micro Data," Working Papers 2016-13, Banco de México.
    2. Dzmitry Kruk, 2016. "SVAR Approach for Extracting Inflation Expectations Given Severe Monetary Shocks: Evidence from Belarus," BEROC Working Paper Series 39, Belarusian Economic Research and Outreach Center (BEROC).

    More about this item

    Keywords

    inflation expectations; anchoring inflation expectations; cost-push shocks; monetary policy; Mexico;

    JEL classification:

    • 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
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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