Inflation Dynamics in Mexico: A Characterization Using the New Phillips Curve

Manuel Ramos Francia and Torres García Alberto

No 2006-15, Working Papers from Banco de México

Abstract: The paper describes the dynamics of inflation in the Mexican economy from 1992 to 2006 using the New Phillips curve framework. The purpose is to identify key structural characteristics of the economy (structural parameters) that define the short-run dynamics of inflation. Results show that despite a previous history of high inflation, a hybrid version of the New Phillips curve fits the data well for the period 1992-2006. The short-run dynamics of inflation in Mexico are best described when both backward and forward looking components are considered. In addition, estimates for the sub-sample 1997-2006 show that as inflation has fallen, on average, prices remain fixed for a longer horizon, the fraction of firms that use a backward looking rule of thumb to set their price decreases and the forward looking component of the inflation process gains importance.

JEL-codes: E31 (search for similar items in EconPapers)
Date: 2006-12
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Inflation dynamics in Mexico: A characterization using the New Phillips curve (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:bdm:wpaper:2006-15

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