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Structural Volatility in Mexico: A Policy Report

  • Ricardo J. Caballero

This paper surveys Mexico`s economic weaknesses and provides related policy recommendations. Current problems include weak international financial links and external conditions, a recurrent credit crunch and financial underdevelopment problem, with particularly fragile banks, a weak fiscal situation, due to extreme vulnerability to internal and external shocks, and a latent monetary policy credibility problem. The paper`s policy recommendations include improving external financial links, reducing direct exposure to external shocks, accelerating domestic financial deepening and strengthening existing arrangements, reducing public accounts exposure to internal and external shocks, and stabilizing very high and very low frequency movements in the nominal exchange rate.

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Paper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 4209.

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Date of creation: Aug 2000
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Handle: RePEc:idb:wpaper:4209
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  1. Ricardo J. Caballero & Arvind Krishnamurthy, 1998. "Emerging Market Crises: An Asset Markets Perspective," NBER Working Papers 6843, National Bureau of Economic Research, Inc.
  2. Michael Gavin & Ricardo Hausmann, 1996. "The Roots of Banking Crises: The Macroeconomic Context," IDB Publications (Working Papers) 5819, Inter-American Development Bank.
  3. Ricardo J. Caballero, 2000. "Structural Volatility in Argentina: A Policy Report," IDB Publications (Working Papers) 6470, Inter-American Development Bank.
  4. Gaston Gelos & Alejandro M. Werner, 1999. "Financial Liberalization, Credit Constraints, and Collateral: Investment in the Mexican Manufacturing Sector," IMF Working Papers 99/25, International Monetary Fund.
  5. Hans J. Blommestein, 1997. "Institutional Investors, Pension Reform and Emerging Securities Markets," IDB Publications (Working Papers) 6807, Inter-American Development Bank.
  6. Peter M. Garber, 1998. "Derivatives in International Capital Flows," NBER Working Papers 6623, National Bureau of Economic Research, Inc.
  7. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-86, June.
  8. Reinhart, Carmen & Leiderman, Leonardo, 1994. "Capital inflows to Latin America," MPRA Paper 13406, University Library of Munich, Germany.
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