Analysis of output fluctuations in Mexico: application of the Romer model and the Taylor rule

Yu Hsing

Global Business and Economics Review, 2005, vol. 7, issue 4, 353-362

Abstract: Extending the Romer (2000) model and the Taylor (1993; 1998; 1999) rule, this paper derives theoretical relationships between equilibrium output in Mexico and a change in the exchange rate, stock values, or the world interest rate. Empirical results show that more deficit spending, higher stock prices, real peso appreciation, a lower federal funds rate, more world output, and lower expected inflation would help raise the Mexican output. The central bank plays a major role in determining the directions and magnitude of these impacts.

Keywords: Romer model; Taylor rule; exchange rates; deficit spending; inflation; world interest rates; output fluctuations; Mexico; equilibrium output; stock values; central bank; Mexican economy. (search for similar items in EconPapers)
Date: 2005
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