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Exchange Rate Bands and Monetary Policy: The Case of Mexico

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  • Moisés J. Schwartz

    (Banco de México. México, D.F. Mexico.)

Abstract

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.

Suggested Citation

  • Moisés J. Schwartz, 1994. "Exchange Rate Bands and Monetary Policy: The Case of Mexico," Economía Mexicana NUEVA ÉPOCA, CIDE, División de Economía, vol. 0(2), pages 287-317, July-Dece.
    • Handle: RePEc:emc:ecomex:v:3:y:1994:i:2:p:287-317
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    File URL: http://www.economiamexicana.cide.edu/num_anteriores/III-2/02_SCHWARTZ_(287-317).pdf
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    Cited by:

    1. Julio A. Santaella & Abraham E. Vela, 2005. "The 1987 Mexican Disinflation Program: An Exchange-rate-based Stabilization?," Economía Mexicana NUEVA ÉPOCA, CIDE, División de Economía, vol. 0(1), pages 5-40, January-J.

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