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Effects of Volatility of the Exchange Rate on Inflation Expectations and Growth Prospects in Mexico (2002-2014)

Author

Listed:
  • Guillermo Benavides

    () (EGADE Business School, Tecnológico de Monterrey, Campus Ciudad de México. México, D.F. Mexico.)

  • Isela Elizabeth Téllez-León

    () (Escuela Superior de Economía, Instituto Politécnico Nacional. México, D.F. México.)

  • Francisco Venegas-Martínez

    () (Escuela Superior de Economía, Instituto Politécnico Nacional. México, D.F. México)

Abstract

This paper is aimed at assessing the impact of exchange rate volatility on inflation expectations and economic growth prospects in Mexico. In order to examine whether there is some degree of causality, we will be using standard multivariate volatility models. The goal of this research is to measure the direction of causality, that is, we will analyze, econometrically, potential relationships in both directions. The main finding is that there is only a statistically significant relationship between the exchange rate volatility and the volatility of inflation expectations, while no statistically significant association with growth prospects was found; these results provide important information that could be used in monetary policy design.

Suggested Citation

  • Guillermo Benavides & Isela Elizabeth Téllez-León & Francisco Venegas-Martínez, 2015. "Effects of Volatility of the Exchange Rate on Inflation Expectations and Growth Prospects in Mexico (2002-2014)," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(2), pages 63-78, November.
  • Handle: RePEc:ere:journl:v:xxxiv:y:2015:i:2:p:63-78
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    References listed on IDEAS

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    More about this item

    Keywords

    Exchange Rate Volatility; Monetary Policy; Time Series Analysis;

    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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