Exchange Rate Bands and Monetary Policy: The Case of Mexico
In addition to the well-known policy recommendations of tight fiscal and monetary policies to curb inflation in traditional stabilization programs, the disinflation attempt in Mexico relied on the exchange rate as a nominal anchor. The exchange rate regimen evolved from a publicly announced rate of devaluation of the peso to a fully-fledged exchange rate band. The gradual widening of the band and its asymmetric feature combined a considerable degree of certainty with a greater degree of flexibility. The paper analyses the role played by exchange rate policy in Mexico’s stabilization effort and its monetary policy implications. Special emphasis is given to intra-marginal interventions by the Central Bank.
Volume (Year): III (1994)
Issue (Month): 2 (July-December)
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