IDEAS home Printed from https://ideas.repec.org/p/lev/wrkpap/wp_1057.html
   My bibliography  Save this paper

Rise and Fall of Mexican Super Peso: Heterodox Perspective versus Orthodoxy

Author

Listed:
  • Laura Lisset Montiel-Orozco

Abstract

This working paper contrasts the neo-Keynesian and post-Keynesian theories of monetary policy for an open economy, highlighting the irrelevance of the orthodox theory and the explanatory capacity of heterodoxy for an emerging economy such as Mexico. It focuses on the role of the central bank and the case of the Mexican currency during the economic recovery after the Great Lockout. In the first section, we criticize two proposals of the 3-Equation New-Keynesian model, concluding that, implicitly, both models reaffirm the extreme neutrality of money and the exchange rate in both the short and the long runs. In contrast, we analyze the post-Keynesian exchange rate model proposed by John T. Harvey (2009). In addition, we rely on the fundamentals of the heterodox school of thought such as the financial instability hypothesis of Hyman Minsky (1994) and the relevance of capital flows for the determination of the exchange rate and its implications for economic growth and prices by Jan Kregel (2008). Finally, the erratic behavior of the excessive appreciation of the Mexican Super Peso against the dollar after the recovery of the COVID-19 crisis and in the context of global risk is presented.

Suggested Citation

  • Laura Lisset Montiel-Orozco, 2024. "Rise and Fall of Mexican Super Peso: Heterodox Perspective versus Orthodoxy," Economics Working Paper Archive wp_1057, Levy Economics Institute.
    • Handle: RePEc:lev:wrkpap:wp_1057
    as

    Download full text from publisher

    File URL: https://www.levyinstitute.org/wp-content/uploads/2025/03/wp_1057.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Richard Clarida & Jordi Gali & Mark Gertler, 2001. "Optimal Monetary Policy in Open versus Closed Economies: An Integrated Approach," American Economic Review, American Economic Association, vol. 91(2), pages 248-252, May.
    2. James K. Galbraith, 2008. "The Collapse of Monetarism and the Irrelevance of the New Monetary Consensus," Economics Policy Note Archive 08-1, Levy Economics Institute.
    3. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-325, August.
    4. John Harvey, 2007. "Teaching Post Keynesian exchange rate theory," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 30(2), pages 147-168.
    5. Richard Clarida & Jordi Gali & Mark Gertler, 2001. "Optimal Monetary Policy in Closed versus Open Economies: An Integrated Approach," NBER Working Papers 8604, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gürkaynak, Refet S. & Kısacıkoğlu, Burçin & Lee, Sang Seok, 2022. "Exchange rate and inflation under weak monetary policy: Turkey verifies theory," CFS Working Paper Series 679, Center for Financial Studies (CFS).
    2. Ha, Jongrim & Kim, Dohan & Kose, M. Ayhan & Prasad, Eswar S., 2025. "Resolving puzzles of monetary policy transmission in emerging markets," European Economic Review, Elsevier, vol. 173(C).
    3. Peter Rosenkranz & Tobias Straumann & Ulrich Woitek, 2022. "The limits of internal devaluation: Switzerland during the great depression," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 158(1), pages 1-17, December.
    4. Wolfram Berger, 2008. "Monetary Policy Rules for a Small Open Economy," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 37(1), pages 1-30, February.
    5. Jae Shim, 2016. "Monetary Policy in the Small Open Economy with Market Segmentation," Department of Economics Working Papers 53/16, University of Bath, Department of Economics.
    6. Juan Manuel Candelo-Viafara & Andr�s Oviedo-G�mez, 2021. "La tasa de cambio y sus impactos en los agregados económicos colombianos: una aproximación FAVAR," Revista Facultad de Ciencias Económicas, Universidad Militar Nueva Granada, vol. 29(2), pages 121-142.
    7. Batini, Nicoletta & Harrison, Richard & Millard, Stephen P., 2003. "Monetary policy rules for an open economy," Journal of Economic Dynamics and Control, Elsevier, vol. 27(11), pages 2059-2094.
    8. Xiao, Wei, 2008. "Increasing Returns And The Design Of Interest Rate Rules," Macroeconomic Dynamics, Cambridge University Press, vol. 12(1), pages 22-49, February.
    9. repec:osf:socarx:v8zdk_v1 is not listed on IDEAS
    10. Philip R. Lane, 2003. "Business Cycles and Macroeconomic Policy in Emerging Market Economies," International Finance, Wiley Blackwell, vol. 6(1), pages 89-108, March.
    11. Roberta CARDANI, 2008. "Optimal Monetary Policy with Wealth Effect and Cost Channel," EcoMod2008 23800021, EcoMod.
    12. repec:diw:diwwpp:dp1907 is not listed on IDEAS
    13. Daniel Buncic & Martin Melecky, 2008. "An Estimated New Keynesian Policy Model for Australia," The Economic Record, The Economic Society of Australia, vol. 84(264), pages 1-16, March.
    14. repec:csg:ajrcwp:04 is not listed on IDEAS
    15. Leith, Campbell & Wren-Lewis, Simon, 2009. "Taylor rules in the open economy," European Economic Review, Elsevier, vol. 53(8), pages 971-995, November.
    16. Alpaslan AKÇORAOĞLU, 2012. "Yeni Açık Ekonomi Makroiktisat Teorisi ve Para Politikasının Uluslararası Boyutları," Ekonomik Yaklasim, Ekonomik Yaklasim Association, vol. 23(85), pages 57-82.
    17. Oskolkov, Aleksei, 2023. "Exchange rate policy and heterogeneity in small open economies," Journal of International Economics, Elsevier, vol. 142(C).
    18. Michael McLeay & Silvana Tenreyro, 2020. "Optimal Inflation and the Identification of the Phillips Curve," NBER Macroeconomics Annual, University of Chicago Press, vol. 34(1), pages 199-255.
    19. Ali Dib, 2003. "An estimated Canadian DSGE model with nominal and real rigidities," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 36(4), pages 949-972, November.
    20. William A. Barnett & Unal Eryilmaz, 2022. "Monetary Policy and Determinacy: An Inquiry in Open Economy New Keynesian Framework," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 202203, University of Kansas, Department of Economics.
    21. William A. Barnett & Unal Eryilmaz, 2023. "Monetary Policy and Determinacy: An Inquiry into Open Economy New Keynesian Macrodynamics," Open Economies Review, Springer, vol. 34(2), pages 217-253, April.
    22. Paul R. Bergin & Hyung-Cheol Shin & Ivan Tchakarov, 2017. "Does Exchange Rate Variability Matter for Welfare? A Quantitative Investigation of Stabilization Policies," World Scientific Book Chapters, in: International Macroeconomic Interdependence, chapter 13, pages 363-386, World Scientific Publishing Co. Pte. Ltd..
    23. Prasad, Nalini, 2018. "Sterilized interventions and capital controls," Journal of International Money and Finance, Elsevier, vol. 88(C), pages 101-121.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • F31 - International Economics - - International Finance - - - Foreign Exchange

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lev:wrkpap:wp_1057. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lindsey Carter (email available below). General contact details of provider: https://www.levyinstitute.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.