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The Effects of Unanticipated Money Growth on Prices, Output, and its Composition in a Fixed-Exchange-Rate Open Economy: The Mexican Experience

Author

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  • Blejer, Mario I.
  • Fernandez, Roque B.

Abstract

This paper analyses the effects of monetary expansion on real output in a small open economy. A two-sector model (traded and nontraded goods) is considered and it is postulated that real effects can arise only from changes in the exogenous component of the money supply (domestic'-credit creation). The model is used to test the Mexican experience and it is found that when appropriately defined to allow for the openness of the economy, unexpected monetary growth raises the cyclical component of real output in the nontraded-goods sector and tends to reduce it in the traded-goods sector.

Suggested Citation

  • Blejer, Mario I. & Fernandez, Roque B., "undated". "The Effects of Unanticipated Money Growth on Prices, Output, and its Composition in a Fixed-Exchange-Rate Open Economy: The Mexican Experience," Papers 262903, Center for Latin American Development Studies Discussion Papers.
    • Handle: RePEc:ags:cladsp:262903
    DOI: 10.22004/ag.econ.262903
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